2008 Legislation
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HOUSE BILL NO. 549<br /> – Income tax, college savings plan

HOUSE BILL NO. 549

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Bill Status



H0549......................................................by STATE AFFAIRS
COLLEGE SAVINGS PLANS - Amends existing law relating to college savings
plans to provide that the addition to taxable income when transferring
moneys from Idaho's college savings plan to a qualified tuition program
that is operated in another state is limited to the amount of the total
contributions to the Idaho Individual Trust Account or savings account by
the account owner in the twelve months preceding the date of the transfer.

02/21    House intro - 1st rdg - to printing
02/22    Rpt prt - to Rev/Tax
03/06    Rpt out - rec d/p - to 2nd rdg
03/07    2nd rdg - to 3rd rdg
03/10    3rd rdg - PASSED - 66-0-4
      AYES -- Anderson, Andrus, Barrett, Bayer, Bell, Bilbao, Block, Bock,
      Boe, Bolz, Bowers, Brackett, Bradford, Chadderdon, Chavez, Chew,
      Clark, Collins, Crane, Durst, Eskridge, Hagedorn, Hart, Harwood,
      Henbest, Henderson, Jaquet, Killen, King, Kren, Lake, LeFavour,
      Loertscher, Luker, Marriott, Mathews, McGeachin, Mortimer, Moyle,
      Nielsen, Nonini, Patrick, Pence, Raybould, Ringo, Roberts, Ruchti,
      Rusche, Sayler, Schaefer, Shepherd(02), Shepherd(08), Shirley,
      Shively, Smith(30), Smith(24), Snodgrass, Stevenson, Thayn, Thomas,
      Trail, Vander Woude, Wills, Wood(27), Wood(35), Mr. Speaker
      NAYS -- None
      Absent and excused -- Bedke, Black, Labrador, Pasley-Stuart
    Floor Sponsor - Lake
    Title apvd - to Senate
03/11    Senate intro - 1st rdg - to Loc Gov
03/14    Rpt out - rec d/p - to 2nd rdg
03/17    2nd rdg - to 3rd rdg
03/19    3rd rdg - PASSED - 34-0-1
      AYES -- Andreason, Bair, Bastian, Bilyeu, Broadsword, Burkett,
      Cameron, Coiner, Corder, Darrington, Davis, Fulcher, Geddes, Goedde,
      Hammond, Heinrich, Hill, Jorgenson, Kelly, Keough, Langhorst, Little,
      Lodge, Malepeai(Sagness), McGee, McKague, McKenzie, Pearce,
      Richardson, Schroeder, Siddoway, Stegner, Stennett, Werk
      NAYS -- None
      Absent and excused -- Gannon
    Floor Sponsor - Langhorst
    Title apvd - to House
03/20    To enrol - Rpt enrol - Sp/Pres signed
03/21    To Governor
03/25    Governor signed
         Session Law Chapter 261
         Effective: 01/01/08

Bill Text




                                                                       
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-ninth Legislature                   Second Regular Session - 2008

                                                                       

                              IN THE HOUSE OF REPRESENTATIVES

                                     HOUSE BILL NO. 549

                                 BY STATE AFFAIRS COMMITTEE

  1                                        AN ACT
  2    RELATING TO ADJUSTMENTS TO TAXABLE INCOME;  AMENDING  SECTION  63-3022,  IDAHO
  3        CODE,  TO  PROVIDE  THAT THE ADDITION TO TAXABLE  INCOME WHEN TRANSFERRING
  4        MONEYS FROM IDAHO'S COLLEGE SAVINGS PLAN TO A  QUALIFIED  TUITION  PROGRAM
  5        THAT  IS  OPERATED  BY ANOTHER STATE IS LIMITED TO THE AMOUNT OF THE TOTAL
  6        CONTRIBUTIONS TO THE IDAHO INDIVIDUAL TRUST ACCOUNT OR SAVINGS ACCOUNT  BY
  7        THE ACCOUNT OWNER IN THE TWELVE MONTHS PRECEDING THE DATE OF THE TRANSFER;
  8        DECLARING AN EMERGENCY AND PROVIDING RETROACTIVE APPLICATION.

  9    Be It Enacted by the Legislature of the State of Idaho:

 10        SECTION  1.  That  Section 63-3022, Idaho Code, be, and the same is hereby
 11    amended to read as follows:

 12        63-3022.  ADJUSTMENTS TO TAXABLE INCOME. The  additions  and  subtractions
 13    set  forth  in  this section, and in sections 63-3022A through 63-3022Q, Idaho
 14    Code, are to be applied to the  extent  allowed  in  computing  Idaho  taxable
 15    income:
 16        (a)  Add  any  state  and  local  taxes,  as defined in section 164 of the
 17    Internal Revenue Code and, measured by net income, paid or accrued during  the
 18    taxable  year adjusted for state or local tax refunds used in arriving at tax-
 19    able income.
 20        (b)  Add the net operating loss deduction  used  in  arriving  at  taxable
 21    income.
 22        (c)  (1) A net operating loss for any taxable year commencing on and after
 23        January  1,  2000, shall be a net operating loss carryback not to exceed a
 24        total of one hundred thousand dollars ($100,000) to the  two  (2)  immedi-
 25        ately  preceding  taxable years. Any portion of the net operating loss not
 26        subtracted in the two (2) preceding years may be subtracted  in  the  next
 27        twenty  (20) years succeeding the taxable year in which the loss arises in
 28        order until exhausted. The sum of the deductions may not exceed the amount
 29        of the net operating loss deduction incurred. At the election of the  tax-
 30        payer,  the two (2) year carryback may be foregone and the loss subtracted
 31        from income received in taxable years arising  in  the  next  twenty  (20)
 32        years  succeeding the taxable year in which the loss arises in order until
 33        exhausted. The election shall be made as under section  172(b)(3)  of  the
 34        Internal  Revenue  Code.  An election under this subsection must be in the
 35        manner prescribed in the rules of the state tax commission and  once  made
 36        is irrevocable for the year in which it is made. The term "income" as used
 37        in this subsection (c) means Idaho taxable income as defined in this chap-
 38        ter as modified by section 63-3021(b)(2), (3) and (4), Idaho Code.
 39        (2)  Net operating losses incurred by a corporation during a year in which
 40        such corporation did not transact business in Idaho or was not included in
 41        a  group of corporations combined under subsection (t) of section 63-3027,
 42        Idaho Code, may not be subtracted. However, if at least one  (1)  corpora-
 43        tion  within a group of corporations combined under subsection (t) of sec-

                                       2

  1        tion 63-3027, Idaho Code, was transacting business  in  Idaho  during  the
  2        taxable  year  in which the loss was incurred, then the net operating loss
  3        may be subtracted. Net operating losses incurred by a person, other than a
  4        corporation, in activities not taxable by Idaho may not be subtracted.
  5        (d)  In the case of a corporation, add the amount deducted under the  pro-
  6    visions  of sections 243(a) and (c), 244, 245 and 246A of the Internal Revenue
  7    Code (relating to  dividends received by corporations) as limited  by  section
  8    246(b)(1) of said code.
  9        (e)  In  the  case  of  a corporation, subtract an amount determined under
 10    section 78 of the Internal Revenue Code to be taxable as dividends.
 11        (f)  Subtract the amount of any income received or accrued during the tax-
 12    able year which is exempt from taxation by this state, under the provisions of
 13    any other law of this state or a law of the United States, if  not  previously
 14    subtracted in arriving at taxable income.
 15        (g)  For  the purpose of determining the Idaho taxable income of the bene-
 16    ficiary of a trust or of an estate:
 17        (1)  Distributable net income as defined for federal tax purposes shall be
 18        corrected for the other adjustments required by this section.
 19        (2)  Net operating losses attributable to a  beneficiary  of  a  trust  or
 20        estate under section 642 of the Internal Revenue Code shall be a deduction
 21        for  the  beneficiary  to  the extent that income from the trust or estate
 22        would be attributable to this state under the provisions of this chapter.
 23        (h)  In the case of an individual who is on active  duty  as  a  full-time
 24    officer,  enlistee  or  draftee,  with  the armed forces of the United States,
 25    which full-time duty is or will be continuous and uninterrupted for  one  hun-
 26    dred  twenty  (120)  consecutive days or more, deduct compensation paid by the
 27    armed forces of the United States for services performed outside  this  state.
 28    The deduction is allowed only to the extent such income is included in taxable
 29    income.
 30        (i)  In the case of a corporation, including any corporation included in a
 31    group  of corporations combined under subsection (t) of section 63-3027, Idaho
 32    Code, add any capital loss deducted which loss was incurred during any year in
 33    which such corporation did not transact business in Idaho. However, do not add
 34    any capital loss deducted if a corporation, including  any  corporation  in  a
 35    group  of corporations combined under subsection (t) of section 63-3027, Idaho
 36    Code, was transacting business in Idaho during the taxable year in  which  the
 37    loss  was  incurred.  In the case of persons, other than corporations, add any
 38    capital loss deducted which was incurred in activities not taxable by Idaho at
 39    the time such loss was incurred. In computing the income taxable to an S  cor-
 40    poration or partnership under this section, deduction shall not be allowed for
 41    a  carryover  or  carryback of a net operating loss provided for in subsection
 42    (c) of this section or a capital loss provided for  in  section  1212  of  the
 43    Internal Revenue Code.
 44        (j)  In  the  case of an individual, there shall be allowed as a deduction
 45    from gross income either (1) or (2) at the option of the taxpayer:
 46        (1)  The standard deduction as defined in  section  63,  Internal  Revenue
 47        Code.
 48        (2)  Itemized  deductions as defined in section 63 of the Internal Revenue
 49        Code except state or local taxes measured by net income and general  sales
 50        taxes as either is defined in section 164 of the Internal Revenue Code.
 51        (k)  Add  the  taxable  amount  of any lump sum distribution excluded from
 52    gross income for federal income tax purposes under the ten (10) year averaging
 53    method. The taxable amount will include the ordinary income  portion  and  the
 54    amount eligible for the capital gain election.
 55        (l)  Deduct  any  amounts included in gross income under the provisions of

                                       3

  1    section 86 of the Internal Revenue Code relating to  certain  social  security
  2    and railroad benefits.
  3        (m)  In  the case of a self-employed individual, deduct the actual cost of
  4    premiums paid to secure worker's compensation insurance for coverage in Idaho,
  5    if such cost has not been deducted in arriving at taxable income.
  6        (n)  In the case of an individual, deduct the amount contributed to a col-
  7    lege  savings program pursuant to chapter 54, title 33, Idaho  Code,  but  not
  8    more  than four thousand dollars ($4,000) per tax year. If the contribution is
  9    made on or before April 15, 2001, it may be deducted for tax year 2000 and  an
 10    individual  can make another contribution and claim the deduction according to
 11    the limits provided in this subsection during 2001 for tax year 2001, as  long
 12    as the contribution is made on or before December 31, 2001.
 13        (o)  In  the case of an individual, add the amount of a nonqualified with-
 14    drawal from an individual trust account or savings account established  pursu-
 15    ant  to chapter 54, title 33, Idaho Code, less any amount of such nonqualified
 16    withdrawal included in the individual's federal gross income pursuant to  sec-
 17    tion 529 of the Internal Revenue Code.
 18        (p)  In  the case of an individual, add the amount of a withdrawal from an
 19    individual trust account or savings account established  pursuant  to  chapter
 20    54,  title  33,  Idaho  Code,  transferred  to a qualified tuition program, as
 21    defined in section 529 of the Internal Revenue Code, that  is  operated  by  a
 22    state other than Idaho. The addition provided in this subsection is limited to
 23    the amount of the total contributions to the Idaho individual trust account or
 24    savings  account  by the account owner in the twelve (12) months preceding the
 25    date of the transfer.

 26        SECTION 2.  An emergency existing  therefor,  which  emergency  is  hereby
 27    declared to exist, this act shall be in full force and effect on and after its
 28    passage and approval, and retroactively to January 1, 2008.

Statement of Purpose / Fiscal Impact



                       STATEMENT OF PURPOSE

                             RS 17928

The College Savings Program Board noted that there has been an
increase in account owners making a deposit to their account,
taking the generous Idaho tax deduction, and then quickly rolling
the funds into another state's program. This process is
inconsistent with the tax deduction's purpose of encouraging
participation in the Idaho College Savings Program. In response,
the Legislature enacted Idaho Code 63-3022(p), which requires
that rollovers be taxed. This provision had the unintended
consequence of taxing all rollovers, even if the funds had been
in the account for a long period of time or if a grandparent or
other party had taken the tax deduction for the deposit. This
bill limits the period in which a rollover is taxed to twelve
(12) months after the funds are deposited and provides that an
account owner is only taxed on deposits made by the account
owner.



                           FISCAL NOTE

Taxation of rollovers may be reduced. The College savings Program
Board expects the reduction in tax revenue to be minor.






Contact
Name: Liza Carberry, Investment Manager, State Treasurer's Office
Phone: (208) 332-2997


STATEMENT OF PURPOSE/FISCAL NOTE                         H 549