2005 Idaho Code - 63-3027C — ELECTION IS BINDING -- TREATMENT OF DIVIDENDS

                                  TITLE  63
                             REVENUE AND TAXATION
                                  CHAPTER 30
                                  INCOME TAX
    63-3027C.  ELECTION IS BINDING -- TREATMENT OF DIVIDENDS. (a) A
water's-edge election shall be made in the original return for a year and
shall be binding for all years thereafter, except as follows:
    (1)  If, in the future, the United States supreme court or the supreme
    court of the state of Idaho rules that there is a state or federal
    constitutional right for a group of corporations to use the worldwide
    unitary method, a water's-edge combined group of corporations may, without
    permission of the tax commission, change its future filing to the
    worldwide unitary method.
    (2)  Any changes to use of the water's-edge method or any other changes
    beyond those described in paragraph (1) of this subsection may only occur
    with the written permission of the tax commission.
    (3)  No water's-edge election shall be made for an income year beginning
    prior to the operative date of sections 63-3027B through 63-3027E, Idaho
    Code.
    (b)  When disregarding an election or granting a change of election, the
tax commission shall impose conditions which are necessary to prevent the
avoidance of tax or to clearly reflect income for the period the election was
made.
    (c)  For purposes of this section:
    (1)  Dividends received from payors incorporated outside the fifty (50)
    states and District of Columbia, to the extent taxable, shall be treated
    as income subject to apportionment.
    (2)  The income of corporations filing elections under section 936 of the
    Internal Revenue Code shall be deemed dividends received from payors
    incorporated outside the fifty (50) states and District of Columbia.
    (3)  Eighty-five per cent (85%) of all dividends described in subsection
    (c)(1) or (c)(2) of this section shall be excluded from income subject to
    apportionment.
    (4)  The dividends subject to apportionment shall be in lieu of any
    expenses attributable to such dividend income.
    (5)  Any actual dividend received from a corporation filing an election
    under section 936 of the Internal Revenue Code shall be eliminated from
    income.
    (d)  Any dividend from any payor required to be combined under the
water's-edge election shall be eliminated from the calculation of
apportionable income. Dividends received from a corporation described in
section 922 of the Internal Revenue Code (defining "FSC") will be treated as
follows:
    (1)  Dividends received from an FSC will be eliminated in the proportion
    that FSC federal taxable income for the year, out of which the dividend
    was paid, bears to the total FSC income before taxes for such year.
    (2)  The portion of FSC dividend not eliminated under paragraph (1) of
    this subsection will be subject to the eighty-five per cent (85%)
    exclusion provided for in subsection (c)(3) of this section.
    (e)  For purposes of this section:
    (1)  Amounts included in income by reference to subpart F of part III of
    subchapter N of chapter 1 of the Internal Revenue Code shall constitute
    dividends from payors outside the fifty (50) states and District of
    Columbia;
    (2)  Amounts included in income under part VI of subchapter P of chapter 1
    of the Internal Revenue Code shall constitute dividends from payors
    outside the fifty (50) states and the District of Columbia; and
    (3)  Deemed distributions defined by Section 78 of the Internal Revenue
    Code shall be excluded from the income of the water's-edge combined group.