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H0563...............................................by REVENUE AND TAXATION
INCOME TAX - CAPITAL GAINS - Amends existing law to revise qualified
property for capital gains treatment under state income tax law if it is
held by an estate, trust, S corporation, partnership, limited liability
company or an individual.
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 - 67-2-1
AYES -- Anderson, Andrus, Barrett, Bayer, Bedke, Bell, Bilbao, Black,
Block, Bock, Boe, Bolz, Bowers, Brackett, Chadderdon, Chavez, Chew,
Clark, Collins, Crane, Durst, Eskridge, Hagedorn, Hart, Harwood,
Henbest, Henderson, Jaquet, Killen, King, Kren, Labrador, Lake,
Loertscher, Luker, Marriott, Mathews, McGeachin, Mortimer, Moyle,
Nielsen, Nonini, Pasley-Stuart, Patrick, Pence, Raybould, 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 -- LeFavour, Ringo
Absent and excused -- Bradford
Floor Sponsor - Smith(24)
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 314
Effective: 01/01/08
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]] Fifty-ninth Legislature Second Regular Session - 2008IN THE HOUSE OF REPRESENTATIVES HOUSE BILL NO. 563 BY REVENUE AND TAXATION COMMITTEE 1 AN ACT 2 RELATING TO INCOME TAXATION; AMENDING SECTION 63-3022H, IDAHO CODE, TO REVISE 3 QUALIFIED PROPERTY CAPITAL GAINS TREATMENT UNDER STATE INCOME TAX LAW IF 4 IT IS HELD BY AN ESTATE, TRUST, S CORPORATION, PARTNERSHIP, LIMITED LIA- 5 BILITY COMPANY OR AN INDIVIDUAL; DECLARING AN EMERGENCY AND PROVIDING RET- 6 ROACTIVE APPLICATION. 7 Be It Enacted by the Legislature of the State of Idaho: 8 SECTION 1. That Section 63-3022H, Idaho Code, be, and the same is hereby 9 amended to read as follows: 10 63-3022H. DEDUCTION OF CAPITAL GAINS. (1) If an individual taxpayer 11 reports capital gain net income in determining taxable income, eighty percent 12 (80%) in taxable year 2001 and sixty percent (60%) in taxable years thereafter 13 of the capital gain net income from the sale or exchange of qualified property 14 shall be a deduction in determining Idaho taxable income. 15 (2) The deduction provided in this section is limited to the amount of 16 the capital gain net income from all property included in taxable income. 17 Gains treated as ordinary income by the Internal Revenue Code do not qualify 18 for the deduction allowed in this section. The deduction otherwise allowable 19 under this section shall be reduced by the amount of any federal capital gains 20 deduction relating to such property, but not below zero. 21 (3)As used in this sectionProperty held by an estate, trust, S corpora- 22 tion, partnership, limited liability company or an individual is "qualified 23 property"meansunder this section if thefollowingpropertyhavinghad an 24 Idaho situs at the time of sale and is: 25 (a) Real property held at least twelve (12) months; 26 (b) Tangible personal property used in Idaho for at least twelve (12) 27 months by a revenue-producing enterprise; 28 (c) Cattle or horses held for breeding, draft, dairy or sporting purposes 29 for at least twenty-four (24) months if more than one-half (1/2) of the 30 taxpayer's gross income (as defined in section 61(a) of the Internal Reve- 31 nue Code) for the taxable year is from farming or ranching operations in 32 Idaho; 33 (d) Breeding livestock other than cattle or horses held at least twelve 34 (12) months if more than one-half (1/2) of the taxpayer's gross income (as 35 defined in section 61(a) of the Internal Revenue Code) for the taxable 36 year is from farming or ranching operations in Idaho; 37 (e) Timber grown in Idaho and held at least twenty-four (24) months; 38 (f) In determining the period for which property subject to this section 39 has been held by a taxpayer, the provisions of section 1223 of the Inter- 40 nal Revenue Code shall apply, except that the holding period shall not 41 include the holding period of property given up in an exchange, when such 42 property would not have constituted qualified property under this section 43 without regard to meeting the holding period nor shall the holding period 2 1 include any time period in which the property subject to this section was 2 held by a corporation other than an S corporation. 3 (4)If an individual reports a capital gain from qualified property from4an S corporation or a partnership, a deduction shall be allowed under this5section only to the extent the individual held his interest in the income of6the S corporation or the partnership for the time required by subsection (3)7of this section for the property sold.8(5) If an individual reports a capital gain from an estate or a capital9gain from property acquired as a beneficiary of an estate, no deduction shall10be allowed under this section unless the holding period required in subsection11(3) of this section was satisfied by the decedent, the estate, or the benefi-12ciary, or a combination thereof.13(6) If an individual reports a capital gain from a trust or a capital14gain from property acquired as a beneficiary of a trust, no deduction shall be15allowed under this section unless the holding period required in subsection16(3) of this section was satisfied by the grantor, the trust, or the benefi-17ciary, or a combination thereof.18(7)As used in this section "revenue-producing enterprise" means: 19 (a) The production, assembly, fabrication, manufacture, or processing of 20 any agricultural, mineral or manufactured product; 21 (b) The storage, warehousing, distribution, or sale at wholesale of any 22 products of agriculture, mining or manufacturing; 23 (c) The feeding of livestock at a feedlot; 24 (d) The operation of laboratories or other facilities for scientific, 25 agricultural, animal husbandry, or industrial research, development, or 26 testing. 27 SECTION 2. An emergency existing therefor, which emergency is hereby 28 declared to exist, this act shall be in full force and effect on and after its 29 passage and approval, and retroactively to January 1, 2008.
STATEMENT OF PURPOSE
RS 17885
This bill will conform the Idaho income tax law regarding
long-term capital gains in pass-through entities to the Internal
Revenue Code (IRC).
The IRC provides that capital assets transferred to a new or
existing pass-through entity retain the tax basis and holding
period of the transferor. Therefore, when the entity disposes of
the assets, it is entitled to long-term capital gain treatment
based on the transferor's holding period.
The bill strikes provisions in Idaho statute that contradict
this federal law. The provisions deleted by this bill required
the transferor to be a member of the pass-through entity for at
least 12 months (24 months for certain capital assets) even if
the transferor had owned the assets far longer than the time
required to qualify for long-term capital gain treatment.
FISCAL NOTE
FY 2009: Approximately $1 million.
Contact
Name: Sen. Hill
Phone: 208.332.1000
STATEMENT OF PURPOSE/FISCAL NOTE H 563