2005 Idaho Code - 63-3027 — COMPUTING IDAHO TAXABLE INCOME OF MULTISTATE OR UNITARY CORPORATIONS

                                  TITLE  63
                             REVENUE AND TAXATION
                                  CHAPTER 30
                                  INCOME TAX
    63-3027.  COMPUTING IDAHO TAXABLE INCOME OF MULTISTATE OR UNITARY
CORPORATIONS. The Idaho taxable income of any multistate or unitary
corporation transacting business both within and without this state shall be
computed in accordance with the rules set forth in this section:
    (a)  As used in this section, unless the context otherwise requires:
    (1)  "Business income" means income arising from transactions and activity
    in the regular course of the taxpayer's trade or business and includes
    income from the acquisition, management, or disposition of tangible and
    intangible property when such acquisition, management, or disposition
    constitute integral or necessary parts of the taxpayer's trade or business
    operations. Gains or losses and dividend and interest income from stock
    and securities of any foreign or domestic corporation shall be presumed to
    be income from intangible property, the acquisition, management, or
    disposition of which constitute an integral part of the taxpayer's trade
    or business; such presumption may only be overcome by clear and convincing
    evidence to the contrary.
    (2)  "Commercial domicile" means the principal place from which the trade
    or business of the taxpayer is directed or managed.
    (3)  "Compensation" means wages, salaries, commissions and any other form
    of remuneration paid to employees for personal services.
    (4)  "Nonbusiness income" means all income other than business income.
    (5)  "Sales" means all gross receipts of the taxpayer not allocated under
    subsections (d) through (h) of this section.
    (6)  "State" means any state of the United States, the District of
    Columbia, the Commonwealth of Puerto Rico, any territory or possession of
    the United States, and any foreign country or political subdivision
    thereof.
    (b)  Any taxpayer having income from business activity which is taxable
both within and without this state shall allocate and apportion such net
income as provided in this section.
    (c)  For purposes of allocation and apportionment of income under this
section, a taxpayer is taxable in another state if:
    (1)  In that state he is subject to a net income tax, a franchise tax
    measured by net income, a franchise tax for the privilege of doing
    business, or a corporate stock tax; or
    (2)  That state has jurisdiction to subject the taxpayer to a net income
    tax regardless of whether, in fact, the state does or does not.
    (d)  Rents and royalties from real or tangible personal property, capital
gains interest, dividends, or patent or copyright royalties, to the extent
that they constitute nonbusiness income, shall be allocated as provided in
subsections (e) through (h) of this section. Allocable nonbusiness income
shall be limited to the total nonbusiness income received which is in excess
of any related expenses which have been allowed as a deduction during the
taxable year. In the case of allocable nonbusiness interest or dividends,
related expenses include interest on indebtedness incurred or continued to
purchase or carry assets on which the interest or dividends are nonbusiness
income.
    (e) (1)  Net rents and royalties from real property located in this state
    are allocable to this state.
    (2)  Net rents and royalties from tangible personal property are allocable
    to this state:
         (i)   if and to the extent that the property is utilized in this
         state, or
         (ii)  in their entirety if the taxpayer's commercial domicile is in
         this state and the taxpayer is not organized under the laws of or
         taxable in the state in which the property is utilized.
    (3)  The extent of utilization of tangible personal property in a state is
    determined by multiplying the rents and royalties by a fraction, the
    numerator of which is the number of days of physical location of the
    property in the state during the rental or royalty period in the taxable
    year and the denominator of which is the number of days of physical
    location of the property everywhere during all rental or royalty periods
    in the taxable year. If the physical location of the property during the
    rental or royalty period is unknown or unascertainable by the taxpayer,
    tangible personal property is utilized in the state in which the property
    was located at the time the rental or royalty payer obtained possession.
    (f) (1)  Capital gains and losses from sales of real property located in
    this state are allocable to this state.
    (2)  Capital gains and losses from sales of tangible personal property are
    allocable to this state if:
         (i)  the property had a situs in this state at the time of the sale,
         or
         (ii) the taxpayer's commercial domicile is in this state and the
         taxpayer is not taxable in the state in which the property had a
         situs.
    (3)  Capital gains and losses from sales of intangible personal property
    are allocable to this state if the taxpayer's commercial domicile is in
    this state, unless such gains and losses constitute business income as
    defined in this section.
    (g)  Interest and dividends are allocable to this state if the taxpayer's
commercial domicile is in this state unless such interest or dividends
constitute business income as defined in this section.
    (h) (1)  Patent and copyright royalties are allocable to this state:
         (i)  if and to the extent that the patent or copyright is utilized by
         the payer in this state, or
         (ii) if and to the extent that the patent or copyright is utilized by
         the payer in a state in which the taxpayer is not taxable and the
         taxpayer's commercial domicile is in this state.
    (2)  A patent is utilized in a state to the extent that it is employed in
    production, fabrication, manufacturing, or other processing in the state
    or to the extent that a patent product is produced in the state. If the
    basis of receipts from patent royalties does not permit allocation to
    states or if the accounting procedures do not reflect states of
    utilization, the patent is utilized in the state in which the taxpayer's
    commercial domicile is located.
    (3)  A copyright is utilized in a state to the extent that printing or
    other publication originates in the state. If the basis of receipts from
    copyright royalties does not permit allocation to states or if the
    accounting procedures do not reflect states of utilization, the copyright
    is utilized in the state in which the taxpayer's commercial domicile is
    located.
    (i)  (1)  Notwithstanding the election allowed in Article III.1 of the
    multistate tax compact enacted as section 63-3701, Idaho Code, all
    business income shall be apportioned to this state under subsection (j) of
    this section by multiplying the income by a fraction, the numerator of
    which is the property factor plus the payroll factor plus two (2) times
    the sales factor, and the denominator of which is four (4), except as
    provided in paragraph (2) of this subsection.
    (2)  If a corporation, or a parent corporation of a combined group filing
    a combined report under sections 63-3027 and 63-3701, Idaho Code, is an
    electrical corporation as defined in section 61-119, Idaho Code, or is a
    telephone corporation as defined in section 62-603, Idaho Code, all
    business income of the corporation shall be apportioned to this state by
    multiplying the income by a fraction, the numerator of which is the
    property factor plus the payroll factor plus the sales factor, and the
    denominator of which is three (3).
    (j)  (1) In the case of a corporation or group of corporations combined
    under subsection (t) of this section, Idaho taxable income or loss of the
    corporation or combined group shall be determined as follows:
         (i)   from the income or loss of the corporation or combined group of
         corporations, subtract any nonbusiness income, and add any
         nonbusiness loss, included in the total,
         (ii)  multiply the amounts determined under paragraph (1)(i) of this
         subsection by the Idaho apportionment percentage defined in
         subsection (i) of this section, taking into account, where
         applicable, the property, payroll and sales of all corporations,
         wherever incorporated, which are included in the combined group. The
         resulting product shall be the amount of business income or loss
         apportioned to Idaho.
    (2)  To the amount determined as apportioned business income or loss under
    paragraph (1)(ii) of this subsection, add nonbusiness income allocable
    entirely to Idaho under the provisions of this section or subtract
    nonbusiness loss allocable entirely to Idaho under this section. The
    resulting sum is the Idaho taxable income or loss of the corporation.
    (3)  In the case of a corporation not subject to subsection (t) of this
    section, the income or loss referred to in paragraph (1)(i) of this
    subsection, shall be the taxable income of the corporation after making
    appropriate adjustments under the provisions of section 63-3022, Idaho
    Code.
    (k)  The property factor is a fraction, the numerator of which is the
average  value of the taxpayer's real and tangible personal property owned or
rented and used in this state during the tax period and the denominator of
which is the average value of all the taxpayer's real and tangible personal
property owned or rented and used during the tax period.
    (l)  Property owned by the taxpayer is valued at its original cost.
Property rented by the taxpayer is valued at eight (8) times the net annual
rental rate. Net annual rental rate is the annual rental rate paid by the
taxpayer less any annual rental rate received by the taxpayer from subrentals.
    (m)  The average value of property shall be determined by averaging the
values at the beginning and ending of the tax period, but the state tax
commission may require the averaging of monthly values during the tax period
if reasonably required to reflect properly the average value of the taxpayer's
property.
    (n)  The payroll factor is a fraction, the numerator of which is the total
amount paid in this state during the tax period by the taxpayer for
compensation, and the denominator of which is the total compensation paid
everywhere during the tax period.
    (o)  Compensation is paid in this state if:
    (1)  The individual's service is performed entirely within the state; or
    (2)  The individual's service is performed both within and without the
    state, but the service performed without the state is incidental to the
    individual's service within the state; or
    (3)  Some of the service is performed in the state and
         (i)  the base of operations or, if there is no base of operations,
         the place from which the service is directed or controlled is in the
         state, or
         (ii) the base of operations or the place from which the service is
         directed or controlled is not in any state in which some part of the
         service is performed, but the individual's residence is in this
         state.
    (p)  The sales factor is a fraction, the numerator of which is the total
sales of the taxpayer in this state during the tax period, and the denominator
of which is the total sales of the taxpayer everywhere during the tax period.
    (q)  Sales of tangible personal property are in this state if:
    (1)  The property is delivered or shipped to a purchaser, other than the
    United States government, within this state regardless of the f.o.b. point
    or other conditions of the sale, or
    (2)  The property is shipped from an office, store, warehouse, factory, or
    other place of storage in this state and
         (i)  the purchaser is the United States government or
         (ii) the taxpayer is not taxable in the state of the purchaser.
    (r)  Sales, other than sales of tangible property, are in this state, if:
    (1)  The income-producing activity is performed in this state; or
    (2)  The income-producing activity is performed both in and outside this
    state and a greater proportion of the income-producing activity is
    performed in this state than in any other state, based on costs of
    performance.
    (s)  If the allocation and apportionment provisions of this section do not
fairly represent the extent of the taxpayer's business activity in this state,
the taxpayer may petition for or the state tax commission may require, in
respect to all or any part of the taxpayer's business activity, if reasonable:
    (1)  Separate accounting, provided that only that portion of general
    expenses clearly identifiable with Idaho business operations shall be
    allowed as a deduction;
    (2)  The exclusion of any one (1) or more of the factors;
    (3)  The inclusion of one (1) or more additional factors which will fairly
    represent the taxpayer's business activity in this state; or
    (4)  The employment of any other method to effectuate an equitable
    allocation and apportionment of the taxpayer's income.
    (t)  For purposes of this section and sections 63-3027B through 63-3027E,
Idaho Code, the income of two (2) or more corporations, wherever incorporated,
the voting stock of which is more than fifty percent (50%) owned directly or
indirectly by a common owner or owners, when necessary to accurately reflect
income, shall be allocated or apportioned as if the group of corporations were
a single corporation, in which event:
    (1)  The Idaho taxable income of any corporation subject to taxation in
    this state shall be determined by use of a combined report which includes
    the income, determined under subparagraph (2) of this subsection, of all
    corporations which are members of a unitary business, allocated and
    apportioned using apportionment factors for all corporations included in
    the combined report and methods set out in this section. The use of a
    combined report does not disregard the separate corporate identities of
    the members of the unitary group. Each corporation which is transacting
    business in this state is responsible for its apportioned share of the
    combined business income plus its nonbusiness income or loss allocated to
    Idaho, minus its net operating loss carryover or carryback.
    (2)  The income of a corporation to be included in a combined report shall
    be determined as follows:
         (i)   for a corporation incorporated in the United States or included
         in a consolidated federal corporation income tax return, the income
         to be included in the combined report shall be the taxable income for
         the corporation after making appropriate adjustments under the
         provisions of section 63-3022, Idaho Code;
         (ii)  for a corporation incorporated outside the United States, but
         not included in subsection (t)(2)(i) of this section, the income to
         be included in the combined report shall be the net income before
         income taxes of such corporation stated on the profit and loss
         statements of such corporation which are included within the
         consolidated profit and loss statement prepared for the group of
         related corporations of which the corporation is a member, which
         statement is prepared for filing with the United States securities
         and exchange commission. If the group of related companies is not
         required to file such profit and loss statement with the United
         States securities and exchange commission, the profit and loss
         statement prepared for reporting to shareholders and subject to
         review by an independent auditor may be used to obtain net income
         before income taxes. In the alternative, and subject to reasonable
         substantiation and consistent application by the group of related
         companies, adjustments may be made to the profit and loss statements
         of the corporation incorporated outside the United States, if
         necessary, to conform such statements to tax accounting standards as
         required by the Internal Revenue Code as if such corporation were
         incorporated in the United States and required to file a federal
         income tax return, subject to appropriate adjustments under the
         provisions of section 63-3022, Idaho Code; and
         (iii) if the income computation for a group under paragraphs (i) and
         (ii) of this subsection results in a loss, such loss shall be taken
         into account in other years, subject to the provisions of subsections
         (b) and (c) of section 63-3022, Idaho Code.
    (u)  If compensation is paid in the form of a reasonable cash fee for the
performance of management services directly for the United States government
at the Idaho national engineering laboratory, separate accounting for that
part of the business activity without regard to other activity of the taxpayer
in the state of Idaho or elsewhere shall be required; provided that only that
portion of general expenses clearly identifiable with Idaho business
operations of that activity shall be allowed as a deduction.