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H0564...............................................by REVENUE AND TAXATION
INCOME TAX - Amends existing law to provide that a part-year resident is
entitled to a credit against state income taxes for income taxes paid to
another state in regard to income which was earned while the taxpayer is
domiciled or residing in this state.
02/26 House intro - 1st rdg - to printing
02/27 Rpt prt - to Rev/Tax
03/13 Rpt out - rec d/p - to 2nd rdg
03/14 2nd rdg - to 3rd rdg
03/17 3rd rdg - PASSED - 70-0-0
AYES -- Anderson, Andrus, Barrett, Bayer, Bedke, Bell, Bilbao, Black,
Block, Bock, Boe, Bolz, Bowers, Brackett, Bradford, Chadderdon,
Chavez, Chew, Clark, Collins, Crane, Durst, Eskridge, Hagedorn, Hart,
Harwood, Henbest, Henderson, Jaquet, Killen, King, Kren, Labrador,
Lake, LeFavour, Loertscher, Luker, Marriott, Mathews, McGeachin,
Mortimer, Moyle, Nielsen, Nonini, Pasley-Stuart, 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 -- None
Floor Sponsor - LeFavour
Title apvd - to Senate
03/17 Senate intro - 1st rdg - to Loc Gov
03/19 Rpt out - rec d/p - to 2nd rdg
03/20 2nd rdg - to 3rd rdg
Rls susp - 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 - Hill
Title apvd - to House
03/21 To enrol - Rpt enrol - Sp signed
03/24 Pres signed
03/25 To Governor
03/31 Governor signed
Session Law Chapter 315
Effective: 03/31/08 for all claims and
proceedings before the Tax Commission,
Board of Tax Appeals and Idaho courts
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]] Fifty-ninth Legislature Second Regular Session - 2008IN THE HOUSE OF REPRESENTATIVES HOUSE BILL NO. 564 BY REVENUE AND TAXATION COMMITTEE 1 AN ACT 2 RELATING TO INCOME TAXATION; AMENDING SECTION 63-3029, IDAHO CODE, TO PROVIDE 3 THAT A PART-YEAR RESIDENT IS ENTITLED TO A CREDIT FOR INCOME TAXES PAID TO 4 ANOTHER STATE IN REGARD TO INCOME EARNED WHILE THE TAXPAYER IS DOMICILED 5 OR RESIDING IN THIS STATE AND TO MAKE TECHNICAL CORRECTIONS; DECLARING AN 6 EMERGENCY AND PROVIDING APPLICATION. 7 Be It Enacted by the Legislature of the State of Idaho: 8 SECTION 1. That Section 63-3029, Idaho Code, be, and the same is hereby 9 amended to read as follows: 10 63-3029. CREDIT FOR INCOME TAXES PAID ANOTHER STATE. (1) A resident indi- 11 vidual shall be allowed a credit against the tax otherwise due under this 12 chapter for the amount of any income tax imposed on the individual, an S cor- 13 poration, partnership, limited liability company, or trust of which the indi- 14 vidual is a shareholder, partner, member, or beneficiary (to the extent 15 attributable to the individual as a result of the individual's share of the S 16 corporation's, partnership's, limited liability company's or trust's taxable 17 income in another state), for the taxable year by another state on income 18 derived from sources therein while domiciled in Idaho and that is also subject 19 to tax under this chapter. 20 (2) For purposes of this section, "state" shall include any state of the 21 United States, the District of Columbia, or any possession or territory of the 22 United States. 23 (3) (a) Except as provided in subsection (3)(b) of this section, the 24 credit provided under this section shall not exceed the proportion of the 25 tax otherwise due under this chapter that the amount of the adjusted gross 26 income of the taxpayer derived from sources in the other state as modified 27 by this chapter bears to the adjusted gross income of the taxpayer as mod- 28 ified by this chapter. This limitation applies to all individuals. 29 (b) When tax is paid to another state on income of an S corporation, 30 partnership, limited liability company, or trust, the limitation calcu- 31 lated in subsection (3)(a) of this section with respect to that income 32 shall be based on the proportion that the individual taxpayer's share of 33 the entity's taxable income correctly reported to the other state under 34 the laws of the other state bears to the individual's adjusted gross 35 income. This limitation shall apply whether the tax is paid to the other 36 state by the individual or by the S corporation, partnership, limited lia- 37 bility company or trust. 38 (c) The credit provided under this section shall further be limited to 39 the tax paid to the other state. 40 (4) To substantiate the credit allowed under this section, the state tax 41 commission may require a copy of any receipt showing payment of income taxes 42 to the other state or a copy of any return or returns filed with such other 43 state, or both. 2 1 (5) No credit allowed under this section shall be applied in calculating 2 tax due under this chapter if the tax upon which the credit is based has been 3 claimed as a deduction, unless the tax is restored to income on the Idaho 4 return. 5 (6) The credit shall not be allowed if such other state allows a credit 6 against taxes imposed by such state for taxes paid or payable under thisact7 chapter. 8 (7) For purposes of this section an income tax imposed on an S corpora- 9 tion, partnership, limited liability company, or trust includes: 10 (a) A direct tax imposed upon the income for the taxable year of the S 11 corporation, partnership, limited liability company or trust; and 12 (b) An excise or franchise tax that is measured by the income for the 13 taxable year of the S corporation, partnership, limited liability company, 14 or trust. 15 (8) For purposes of subsection (7) of this section, an excise or fran- 16 chise tax is "measured by income" only if the statute imposing the excise or 17 franchise tax provides that the base for the tax: 18 (a) Includes: 19 (i) Revenue from sales; 20 (ii) Revenue from services rendered; and 21 (iii) Income from investments; and 22 (b) Permits a deduction for the cost of goods sold and the cost of ser- 23 vices rendered. 24 (9) A part-year resident is entitled to a credit, determined in the man- 25 ner prescribed by the state tax commission, for income taxes paid to another 26 state in regard to income which is: 27 (a) Earned while the taxpayer is domiciled or residing in this state; and 28 (b) Subject to tax in such other state. 29 (10) If the interest in an S corporation, partnership, or limited liabil- 30 ity company was held for less than the entire taxable year, the share attrib- 31 utable to the individual shall be allocated in the same manner as for federal 32 purposes. 33 SECTION 2. An emergency existing therefor, which emergency is hereby 34 declared to exist, this act shall be in full force and effect on and after its 35 passage and approval, and shall apply to all proceedings and claims before the 36 state tax commission, the board of tax appeals or the courts of this state on 37 the effective date of this act.
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STATEMENT OF PURPOSE
RS 17962
This legislation clarifies the statute that sets forth the method of
determining the income of part-year residents.
Section 63-3026A contains a formula that treats the taxpayer as a
resident for the portion of the year in which he or she resides in Idaho, and
as a non-resident for the time he or she is outside the state.
The statutes governing the taxation of residents allow a credit for taxes
paid in other states on the same income that must be included in Idaho taxable
income. However, section 63-3029A(9) is not as clear as it could be in
specifying that this credit should be allowed to part-year residents with
respect to the income that is being calculated for the period of the year in
which they are treated as being residents. This has resulted in disputes with
taxpayers who are being taxed twice on the same income, both in Idaho and in
the state in which the income was earned.
This legislation clarifies that the credit is allowed to part-year
residents to the extent that their Idaho taxable income, when they are treated
as a resident, is subject to tax in another state.
FISCAL NOTE
The fiscal impact estimated for this bill by the Tax Commission is
$300,000 annually.
Contact: Sen. Brent Hill,
208.332.1000
STATEMENT OF PURPOSE/FISCAL NOTE H 564
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