2008 Legislation
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HOUSE BILL NO. 564<br /> – Income tax, paid to another state


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Bill Status

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

Bill Text

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


                              IN THE HOUSE OF REPRESENTATIVES

                                     HOUSE BILL NO. 564

                             BY REVENUE AND TAXATION COMMITTEE

  1                                        AN ACT

  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.


  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 this act
  7    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.

Statement of Purpose / Fiscal Impact

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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, 

STATEMENT OF PURPOSE/FISCAL NOTE                                 H 564   

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