TITLE 63

REVENUE AND TAXATION

CHAPTER 30

INCOME TAX

63-3070.  Partnership income — Federal adjustments. (1) The definitions set forth in this chapter shall apply to this section unless modified in this section or unless the context clearly requires another definition.

(2)  As used in this section:

(a)  "Administrative adjustment request" means a request for an administrative adjustment filed by a partnership under section 6227 of the Internal Revenue Code.

(b)  "Audited partnership" means a partnership subject to a partnership-level audit resulting in a federal adjustment.

(c)  "Corporate partner" means a partner subject to tax under section 63-3025 or 63-3025A, Idaho Code.

(d)  "Direct partner" means a partner that holds an interest directly in a partnership or pass-through entity.

(e)  "Exempt partner" means a partner that is exempt from taxation under this chapter except on unrelated business taxable income.

(f)  "Federal adjustment" means a change to an item or amount determined by the Internal Revenue Code that is used by a taxpayer to compute Idaho state income tax owed, whether that change results from action by the internal revenue service, including a partnership-level audit, or from the filing of an amended federal return, a federal refund claim, or an administrative adjustment request by the taxpayer.

(g)  "Federal partnership representative" means the person the partnership designates for the taxable year as the partnership’s representative or the person the internal revenue service has appointed to act as the federal partnership representative pursuant to section 6223(a) of the Internal Revenue Code.

(h)  "Final determination date" means the following:

(i)   Except as provided in subparagraphs (ii) and (iii) of this paragraph, if the federal adjustment arises from an internal revenue service audit or other action by the internal revenue service, the final determination date is the first day on which no federal adjustments arising from that audit or other action remain to be finally determined, whether by internal revenue service decision with respect to which all rights of appeal have been waived or exhausted, by agreement, or, if appealed or contested, by a final decision with respect to which all rights of appeal have been waived or exhausted. For agreements required to be signed by a representative of the internal revenue service and the taxpayer, the final determination date is the date on which the last party signed the agreement.

(ii)  For federal adjustments arising from an internal revenue service audit or other action by the internal revenue service, if the taxpayer filed as a member of a combined report or consolidated return under Idaho law, the final determination date is the first day on which no related federal adjustments arising from such audit remain to be finally determined, as described in subparagraph (i) of this paragraph for the entire group.

(iii) If the federal adjustment results from filing an amended federal return, a federal refund claim, or an administrative adjustment request, or if it is a federal adjustment reported on an amended federal return or other similar report filed pursuant to section 6225 (c) of the Internal Revenue Code, the final determination date is the day on which the amended return, refund claim, administrative adjustment request, or other similar report was filed.

(i)  "Final federal adjustment" means a federal adjustment that can no longer be modified because the final determination date for that federal adjustment has passed.

(j)  "Indirect partner" means a partner in a partnership or pass-through entity that itself holds an interest directly or through another indirect partner in a partnership or pass-through entity.

(k)  "Nonresident partner" means an individual, trust, or estate partner that is not a resident partner.

(l)  "Partner" means a person that holds an interest directly or indirectly in a partnership or other pass-through entity.

(m)  "Partnership-level audit" means an examination by the internal revenue service at the partnership level pursuant to sections 6221 through 6241 of the Internal Revenue Code, as amended by P.L. 114-74 and as in effect on November 2, 2015, that results in federal adjustments.

(n)  "Reallocation adjustment" means a federal adjustment resulting from a partnership-level audit or an administrative adjustment request that changes the share of one (1) or more items of partnership income, gain, loss, expense, or credit allocated to direct partners.

(o)  "Report of federal adjustments" means the taxpayer’s report of final federal adjustments to the Idaho state tax commission, including an amended Idaho income tax return, information return, or a uniform multistate report.

(p)  "Resident partner" means an individual, trust, or estate partner that is a resident in Idaho under section 63-3013, Idaho Code, for the relevant tax period.

(q)  "Reviewed year" means the taxable year of a partnership that is subject to a partnership-level audit from which federal adjustments arise.

(r)  "Tiered partner" means any partner that is a partnership or pass-through entity.

(s)  "Unrelated business taxable income" has the same meaning as provided in section 512(a) of the Internal Revenue Code.

(3)  Unless an election has been made pursuant to section 63-3026B, Idaho Code, a taxpayer shall report and pay any Idaho tax due with respect to final federal adjustments arising from an audit or other action by the internal revenue service or reported by the taxpayer on a timely filed amended federal income tax return, including a return or other similar report filed pursuant to section 6225(c)(2) of the Internal Revenue Code, or a federal claim for refund, by filing a report of federal adjustments with the state tax commission for the reviewed year and, if applicable, paying the additional Idaho tax owed by the taxpayer no later than one hundred eighty (180) days after the final determination date. This requirement shall not apply in the case of final federal adjustments required to be reported by a partnership and its partners using the procedures set forth in subsection (4) of this section and final federal adjustments required to be reported for federal purposes pursuant to section 6225(a)(2) of the Internal Revenue Code. If an election has been made pursuant to section 63-3026B, Idaho Code, the procedures and time frames set forth in this section shall apply to the electing partnership rather than the individual partners.

(4)  Except for adjustments required to be reported for federal purposes pursuant to section 6225(a)(2) of the Internal Revenue Code and the distributive share of adjustments that has been reported as required under subsection (3) of this section, partnerships and partners shall report final federal adjustments arising from a partnership-level audit or an administrative adjustment request and make payments as follows:

(a)  A state partnership representative shall act on behalf of the partnership as follows:

(i)   With respect to an action required or permitted to be taken by a partnership under this subsection, and a proceeding under section 63-3048, Idaho Code, with respect to that action, the state partnership representative for the reviewed year shall have the sole authority to act on behalf of the partnership. The partnership’s direct partners and indirect partners shall be bound by those actions.

(ii)  The state partnership representative for the reviewed year is the partnership’s federal partnership representative unless the partnership designates in writing another person as its state partnership representative.

(iii) The state tax commission may establish reasonable qualifications and procedures for designating a person other than the federal partnership representative to be the state partnership representative.

(b)  Final federal adjustments subject to the requirements of this subsection, except for those subject to a properly made election pursuant to paragraph (c) of this subsection, shall be reported as follows:

(i)   No later than ninety (90) days after the final determination date, the partnership shall:

1.  File a completed report of federal adjustments, including information required by Idaho law, with the state tax commission;

2.  Notify each of its direct partners of their distributive share of the final federal adjustments, including information required by the state tax commission; and

3.  File an amended composite return for direct partners as required pursuant to section 63-3022L, Idaho Code, or an amended withholding return for direct partners as required pursuant to section 63-3035, Idaho Code, and pay the additional amount pursuant to sections 63-3024 and 63-3025, Idaho Code, that would have been due had the final federal adjustments been reported properly as required.

(ii)  Except as provided under section 63-3025, Idaho Code, no later than one hundred eighty (180) days after the final determination date, each direct partner taxed pursuant to section 63-3025, Idaho Code, shall:

1.  File a report of federal adjustments reporting its distributive share of the adjustments reported under subparagraph (i)2. of this paragraph, as required under section 63-3069, Idaho Code; and

2.  Pay any additional amount of tax due as if the report of federal adjustments had been properly reported, plus any interest and penalty due under sections 63-3045, 63-3046, and 63-3075, Idaho Code, and less any credit for related amounts paid or withheld and remitted on behalf of the direct partner under subparagraph (i)3. of this paragraph.

(c)(i)  Subject to the limitations provided in subparagraph (iii) of this paragraph, an audited partnership making an election under this paragraph shall, no later than ninety (90) days after the final determination date, file a completed report of federal adjustments, including the information required by section 63-3069, Idaho Code, and notify the state tax commission that it is making the election under this subsection.

(ii)  Subject to the limitations provided in subparagraph (iii) of this paragraph, an audited partnership making an election under this paragraph shall, no later than one hundred eighty (180) days after the final determination date, pay, in lieu of taxes owed by its direct and indirect partners, an amount determined according to this subparagraph as follows:

1.  Exclude from final federal adjustments the distributive share of these adjustments reported to a direct exempt partner not subject to tax under section 63-3025, Idaho Code;

2.  For the total distributive shares of the remaining final federal adjustments reported to direct corporate partners subject to tax under section 63-3025, Idaho Code, and to direct exempt partners subject to tax under section 63-3025, Idaho Code, apportion and allocate such adjustments as provided in section 63-3027, Idaho Code, and multiply the resulting amount by the highest tax rate under section 63-3024, Idaho Code;

3.  For the total distributive shares of the remaining final federal adjustments reported to nonresident direct partners subject to tax under section 63-3024, Idaho Code, determine the amount of the adjustments that is Idaho source income under section 63-3026A, Idaho Code, and multiply the resulting amount by the highest tax rate under section 63-3024, Idaho Code;

4.  For the total distributive shares of the remaining final federal adjustments reported to tiered partners:

(A)  Determine the amount of the adjustments of a type subject to sourcing to Idaho under section 63-3026A, Idaho Code, then determine the portion of this amount that would be sourced to Idaho by applying rules promulgated by the state tax commission;

(B)  Determine the amount of the adjustments of a type not subject to sourcing to Idaho by a nonresident partner under section 63-3026A, Idaho Code;

(C)  Of the amount determined in subparagraph (ii)4.(A) and (B) of this paragraph, determine the portion that, pursuant to rules promulgated by the state tax commission, is properly allocable to nonresident indirect partners or other partners not subject to tax on the adjustments or the portion that can be excluded under procedures for alternative reporting and payment method allowed under paragraph (e) of this subsection;

5.  Multiply the total of the amounts determined in subparagraph (ii)4.(A) and (B) of this paragraph reduced by the amount determined in subparagraph (ii)4.(C) of this paragraph by the highest tax rate under section 63-3024, Idaho Code;

6.  For the total distributive shares of the remaining final federal adjustments reported to resident direct partners subject to tax under section 63-3024, Idaho Code, multiply that amount by the highest tax rate under section 63-3024, Idaho Code; and

7.  Add the amounts determined in subparagraph (ii)2., 3., 5., and 6. of this paragraph, along with interest and penalty as provided in sections 63-3045, 63-3046, and 63-3075, Idaho Code.

(iii)   Final federal adjustments subject to this election exclude:

1.  The distributive share of final audit adjustments that under section 63-3027, Idaho Code, and rules promulgated by the state tax commission, must be included in the unitary business income of any direct or indirect corporate partner, provided it can be reasonably determined by the audited partnership; and

2.  Any final federal adjustments resulting from an administrative adjustment request.

(iv)  An audited partnership not otherwise subject to any reporting or payment obligation to the state of Idaho that makes an election under this subsection consents to be subject to Idaho laws relating to reporting, assessment, payment, and collection of Idaho tax calculated under the election.

(d)  The direct and indirect partners of an audited partnership that are tiered partners, and all of the partners of those tiered partners that are subject to tax under sections 63-3024 and 63-3025, Idaho Code, are subject to the reporting and payment requirements of paragraph (b) of this subsection, and the tiered partners are entitled to make the elections provided in paragraphs (c) and (e) of this subsection. The tiered partners or their partners shall make the required reports and payments no later than ninety (90) days after the time for filing and furnishing statements to tiered partners and their partners as established under section 6226 of the Internal Revenue Code and the federal regulations thereunder. The state tax commission may promulgate rules to establish procedures and interim time periods for the reports and payments required by tiered partners and their partners and for making the elections under this subsection.

(e)  Under procedures adopted by the state tax commission, an audited partnership or tiered partner may enter into an agreement with the state tax commission to use an alternative reporting and payment method, including applicable time requirements or any other provision of this subsection, if the audited partnership or tiered partner demonstrates that the requested method will reasonably provide for the reporting and payment of taxes, penalties, and interest due under the provisions of this subsection. Application for approval of an alternative reporting and payment method must be made by the audited partnership or tiered partner within the time for election as provided in this paragraph or paragraph (c) of this subsection, as appropriate.

(f)(i)  The election made pursuant to paragraph (c) or (e) of this subsection is irrevocable unless the state tax commission, in its discretion, determines otherwise.

(ii)  If properly reported and paid by the audited partnership or tiered partner, or by a partnership that has filed an election under section 63-3026B, Idaho Code, the amount determined in paragraph (c)(ii) of this subsection, or similarly under an optional election under paragraph (e) of this subsection, will be treated as paid in lieu of taxes owed by its direct and indirect partners, to the extent applicable, on the same final federal adjustments. The direct partners or indirect partners may not take any deduction or credit for this amount or claim a refund of the amount in this state. Nothing in this paragraph precludes a direct resident partner from claiming a credit against taxes paid to this state pursuant to section 63-3029, Idaho Code, for any amounts paid by the audited partnership or tiered partner on the resident partner’s behalf to another state or local tax jurisdiction in accordance with the provisions of section 63-3029, Idaho Code.

(g)  Nothing in this section shall be construed to prevent the state tax commission from assessing direct partners or indirect partners for taxes they owe, using the best information available, in the event that a partnership or tiered partner fails for any reason to timely make any report or payment required by this section or by section 63-3026B, Idaho Code.

(5)  The state tax commission shall make adjustments as needed for any additional tax, interest, and penalties arising from final federal adjustments arising from an audit by the internal revenue service, including a partnership-level audit, or reported by the taxpayer on an amended federal income tax return or as part of an administrative adjustment request by the dates provided in this subsection.

(a)  If a taxpayer files with the state tax commission a report of federal adjustments or an amended Idaho tax return as required within the period specified in subsection (3) or (4) of this section, the state tax commission may adjust any amounts, including in-lieu-of amounts, taxes, interest, and penalties arising from those federal adjustments if the state tax commission issues a notice of deficiency determination to the taxpayer no later than:

(i)   The expiration of the limitations period specified in section 63-3068 or 63-3072, Idaho Code; or

(ii)  The expiration of the one (1) year period following the date of the filing with the state tax commission of the report of federal adjustments.

(b)  If the taxpayer fails to file the report of federal adjustments within the period specified in subsection (3) or (4) of this section, as appropriate, or the report of federal adjustments filed by the taxpayer omits final federal adjustments or understates the correct amount of tax owed, the state tax commission may assess amounts or additional amounts, taxes, interest, and penalties arising from the report of federal adjustments if it mails a notice of deficiency determination to the taxpayer by a date that is the latest of the following:

(i)   The expiration of the limitations period specified in section 63-3068, Idaho Code;

(ii)  The expiration of the one (1) year period following the date the report of federal adjustments was filed with the state tax commission; or

(iii) Absent fraud, the expiration of the six (6) year period following the final federal determination date.

(6)  A taxpayer may make estimated payments to the state tax commission, following the process prescribed by the state tax commission, of Idaho tax expected to result from a pending internal revenue service audit prior to the due date of the report of federal adjustments without having to file the report with the state tax commission. The estimated tax payments shall be credited against any tax liability ultimately found to be due to Idaho and shall limit the accrual of further statutory interest on that amount. If the estimated tax payments exceed the final tax liability and statutory interest ultimately determined to be due, the taxpayer is entitled to a refund or credit for the excess, provided the taxpayer files a report of federal adjustments claiming a refund or credit of tax pursuant to section 63-3072, Idaho Code, no later than one (1) year following the final federal determination.

(7)(a)  Except for final federal adjustments required to be reported for federal purposes under section 6225(a)(2) of the Internal Revenue Code, a taxpayer may file a claim for refund or credit of tax arising from federal adjustments made by the internal revenue service on or before the later of:

(i)   The expiration of the last day for filing a claim for refund or credit of Idaho tax pursuant to section 63-3072, Idaho Code, including any extensions; or

(ii)  One (1) year from the date a report of federal adjustments prescribed in subsection (3) or (4) of this section, as applicable, was due to the state tax commission, including any extensions pursuant to subsection (8) of this section.

(b)  The report of federal adjustments shall serve as the means for the taxpayer to report additional tax due, report a claim for refund or credit of tax, and make other adjustments, including to its net operating losses, resulting from adjustments to the taxpayer’s federal taxable income.

(8)(a)  Unless otherwise agreed in writing by the taxpayer and the state tax commission, any adjustments by the state tax commission or by the taxpayer made after the expiration of the time period set forth in section 63-3068, Idaho Code, shall be limited to changes to the taxpayer’s tax liability arising from federal adjustments.

(b)  The time periods provided for in section 63-3069, Idaho Code, may be extended:

(i)   Automatically, upon written notice to the state tax commission, by sixty (60) days for an audited partnership or tiered partner that has ten thousand (10,000) or more direct partners; or

(ii)  By written agreement between the taxpayer and the state tax commission pursuant to section 63-3068(m), Idaho Code.

(c)  Any extension granted under this subsection for filing the report of federal adjustments extends the last day prescribed by law for assessing any additional tax arising from the adjustments to federal taxable income and the period for filing a claim for refund or credit of taxes pursuant to section 63-3068, Idaho Code.

History:

[63-3070, added 2026, ch. 81, sec. 4, p. 430.]