Idaho Administrative Code — Tax Commission, State

IDAPA 35 Tax Commission, State

35.02.01 Tax Commission Administration and Enforcement Rules

IDAPA 35.02.01.000 Legal Authority

Section 63-3039, Idaho Code In General. In accordance with Sections 63-105 and 63-3039, Idaho Code, the Tax Commission has authority to promulgate rules implementing the provisions of the Idaho Income Tax Act.(3-15-22)

02.Related Taxes. This chapter contains rules relating to provisions of the Idaho Income Tax Act, Title 63, Chapter 30, Idaho Code, that are incorporated by reference into statutes relating to other taxes. These include:(3-15-22)

a.Sales and Use Taxes, Title 63, Chapter 36, Idaho Code;(3-15-22)

b.Motor Fuels Taxes, Title 63, Chapter 24, Idaho Code;(3-15-22)

c.Petroleum Transfer Fee, Title 41, Chapter 49, Idaho Code;(3-15-22)

d.Cigarette and Tobacco Products Taxes, Title 63, Chapter 25, Idaho Code;(3-15-22)

e.Beer Taxes, Title 23, Chapter 10, Idaho Code;(3-15-22)

f.Wine Taxes, Title 23, Chapter 13, Idaho Code;(3-15-22)

g.Mine License Taxes, Title 47, Chapter 12, Idaho Code;(3-15-22)

h.Kilowatt Hour Taxes, Title 63, Chapter 27, Idaho Code;(3-15-22)

i.Oil and Gas Taxes, Title 47, Chapter 3, Idaho Code.(3-15-22)

IDAPA 35.02.01.001 Scope

Section 63-3039, Idaho Code Effective Date. To the extent allowed by statute, rules in this chapter are applied on their effective date to all taxable years open for determining tax liability.(3-15-22)

02.Closed Years or Issues. Taxable years closed by the statute of limitations remain closed and are not reopened by the promulgation, repeal or amendment of any rule. Issues resolved by the expiration of appeal time, a notice of deficiency determination, or a final decision of the Tax Commission will not be reopened by the promulgation, repeal, or amendment of any rule.(3-15-22)

03.Transactions Before an Effective Date. A rule will not be applied to transactions occurring before its effective date in a case where, in the opinion of the Tax Commission, to do so would create an obvious injustice.

IDAPA 35.02.01.002 Administrative Appeals

This chapter allows administrative rel ief as provided in Sections 63-3045, 63-3045A, 63-3045B, and 63-3049, Idaho Code.(3-15-22)

IDAPA 35.02.01.003 (Reserved)

IDAPA 35.02.01.010 Definitions

Section 63-3003, Idaho Code Date of Filing or Payment. Materials not mailed with the United States Postal Service or a private delivery service designated as qualifying under Section 7502, Internal Revenue Code, are filed when physically received by the Tax Commission.(3-15-22)

02.Pay, Paid, Payable or Payment. When used in reference to an amount of tax, penalty, interest, fee or other amount of money due to the Tax Commission, the words pay, paid, payable, or payment mean an irrevocable tender to the Tax Commission of lawful money of the United States.(3-15-22)

a.As used herein, lawful money of the United States means;(3-15-22)

i.Currency or coin of the United States at face value; and(3-15-22)

ii.Negotiable checks drawn on a United States bank or other financial institution that are payable in full in money of the United States.(3-15-22)

b.The words pay, paid, payable, or payment do not include:(3-15-22)

i.Submission to the Tax Commission of a check or draft that is subsequently dishonored by the institution on which it is drawn.(3-15-22)

ii.Submission to the Tax Commission of a check or draft drawn on a foreign bank or other financial institution in regard to which any processing fees may be incurred by the state of Idaho.(3-15-22)

IDAPA 35.02.01.011 (Reserved)

IDAPA 35.02.01.110 Declaratory Rulings

Sections 67-5232, 67-5255, Idaho Code

01.Findings Pursuant to Section 67-5206, Idaho Code.(3-15-22)

a.The Tax Commission finds that the Attorney General’s Administrative Rules on declaratory rulings found at IDAPA 04.11.01, “Idaho Rules of Administrative Procedure of the Attorney General,” Sections 400 through 402 do not adequately address the needs of taxpayers seeking a declaratory ruling on applications of the tax law. The Attorney General’s Administrative Rules do not:(3-15-22)

i.Protect taxpayer confidentiality;(3-15-22)

ii.Define the taxpayer’s right to rely on the ruling; or(3-15-22)

iii.Identify the circumstances justifying the denial or withdrawal of a ruling.(3-15-22)

b.Accordingly, this rule will govern declaratory rulings issued by the Tax Commission.(3-15-22)

02.Filing a Petition.(3-15-22)

a.Any person, group, or other association may file a written petition with the Tax Commission asking for an interpretation or determination as to the applicability of a statute, rule, or order issued by the Tax Commission to the party filing the petition. To obtain the determination the petitioner’s tax liability must be directly affected by the determination or the petitioner must demonstrate a direct financial interest in the determination sought.(3-15-22)

b.A petition must be submitted to the Tax Commission in writing and contain an express statement that it is intended to be a petition for a declaratory ruling pursuant to this rule or the Administrative Procedure Act.

03.Tax Commission's Response to Petition. After receiving a petition, the Tax Commission shall:

a.Issue a written declaratory ruling;(3-15-22)

b.Require the petitioner to submit additional facts, evidence, or information as the Tax Commission deems necessary to make a declaratory ruling; or(3-15-22)

c.Decline to make a declaratory ruling. The Tax Commission shall decline to make a declaratory ruling in the following circumstances:(3-15-22)

i.The identity of the taxpayer is not disclosed;(3-15-22)

ii.The request fails to include sufficient facts, evidence, or other information on which a declaratory ruling may be based;(3-15-22)

iii.The issue on which a declaratory ruling is sought is the subject of pending litigation or administrative appeal;(3-15-22)

iv.The petitioner is not a person directly affected by a resolution of the issue presented; or (3-15-22)

v.It appears there are other good or compelling reasons why a declaratory ruling should not be made.

04.Factual Circumstances. A declaratory ruling applies only to the factual circumstances as submitted by the petitioner and applies only to the petitioner seeking the declaratory ruling. The declaratory ruling may not be relied on by a person not named as a petitioner. The declaratory ruling is void if the facts changed significantly, all relevant facts were not disclosed at the time of the petition, or the facts were not accurately represented to the Tax Commission. If the statutory provisions or administrative rules affecting the declaratory ruling are amended by the legislature or the Tax Commission, the declaratory ruling is void as of the date of the amendment to the statute or rule.(3-15-22)

05.Withdrawal of Ruling. If after issuing a declaratory ruling the Tax Commission believes the declaratory ruling is erroneous, it may withdraw the declaratory ruling by giving written notice to the petitioner at his last known address. If the petitioner has relied on the declaratory ruling in good faith, the Tax Commission may not assess any tax liability accruing between the dates the declaratory ruling was issued and its withdrawal.(3-15-22)

06.Confidentiality. Declaratory rulings by the Tax Commission are information subject to the confidentiality requirements of Sections 63-3076 and 63-3077, Idaho Code and Rule 700 of these rules. Factual, financial, or other information relating to a taxpayer is not public record and may not be disclosed to any person except as provided by Sections 63-3076 and 63-3077, Idaho Code, or as authorized by the taxpayer.(3-15-22)

07.Appeals. Sections 67-5270 through 67-5279, Idaho Code, govern the judicial review of declaratory rulings.(3-15-22)

IDAPA 35.02.01.111 (Reserved)

IDAPA 35.02.01.131 Unacceptable Payments

Section 63-3034, Idaho Code Checks and Drafts Previously Dishonored. Nothing herein shall limit the authority of the Tax Commission to refuse to accept a check drawn on the account of a taxpayer who has previously tendered a check dishonored by the institution on which it was drawn.(3-15-22)

02.Checks and Drafts From Foreign Institutions. The Tax Commission may reject a check or draft drawn on a foreign bank or other foreign financial institution.(3-15-22)

03.Checks and Drafts That Result in Processing Fees. The Tax Commission may reject a check or draft that, if accepted, may result in the state of Idaho incurring a processing fee.(3-15-22)

IDAPA 35.02.01.132 (Reserved)

IDAPA 35.02.01.140 Application of Partial Payment

Sections 63-4001, 63-4007, Idaho Code If bad check charges, penalties, or interest accrue as a result of any deficiency in tax, partial payments shall apply in the following order: to bad check charges, interest, tax, and penalty.(3-15-22)

IDAPA 35.02.01.141 (Reserved)

IDAPA 35.02.01.150 Requirements of a Valid Tax Return

Section 63-3076(5), Idaho Code In General. All tax returns filed with the Tax Commission shall be complete and include attached copies of all pertinent schedules or computations.(3-15-22)

02.Supporting Computations and Schedules. The results of supporting computations shall be carried forward to applicable lines on the tax forms. A statement referencing an attached schedule is not acceptable if the taxpayer does not enter the necessary information from the attachments on the tax form. For purposes of this subsection, a return shall be deemed valid if the Tax Commission does not reject the return by mailing it back to the taxpayer.(3-15-22)

03.Information to Compute Tax. A return that does not provide sufficient financial information to compute a tax liability is not a valid tax return.(3-15-22)

04.Accuracy and Required Information. A return need not be totally accurate to be a valid return.

However, for the return to be valid it must:(3-15-22)

a.Be identified as a return;(3-15-22)

b.Be filed using the proper form prescribed by the Tax Commission;(3-15-22)

c.Include the taxpayer’s social security number, federal employer identification number, or Internal Revenue Service processing number;(3-15-22)

d.Include the taxpayer’s name and address;(3-15-22)

e.Include the taxpayer’s Idaho permit or license number, if applicable;(3-15-22)

f.Identify the reporting or tax period;(3-15-22)

g.Contain a computation of the tax liability and sufficient supporting information to show how the taxpayer reached that result; and(3-15-22)

h.Reflect the taxpayer’s honest and genuine effort to satisfy the requirements of the law. For purposes of determining if these requirements are met, documents that contain the following are clearly insufficient: (3-15-22)

i.Broad unspecified constitutional claims;(3-15-22)

ii.Unsupported statements that claim no Idaho activity or income exists; and(3-15-22)

iii.Language that demonstrates a protest against the tax law or its administration.(3-15-22)

05.Signing of Returns. Paper Returns. The taxpayer or an authorized officer or representative shall manually sign the tax return. Both spouses shall sign a joint return. If a taxpayer is deceased or cannot sign his name, a duly authorized person, such as a surviving spouse, executor, administrator or person holding power of attorney may sign the return, indicating his status or relationship. If a taxpayer signs with an X, a witness shall attest his mark.

The signature of the taxpayer constitutes a written declaration of the return’s accuracy.(3-15-22)

06.Reproduced and Substitute Forms. Any reproduced or substitute form or schedule must meet the requirements of the Tax Commission’s original form.(3-15-22)

a.Specific instructions for substitute forms are available on request from the Tax Commission. The use of substitute forms requires prior approval of the Tax Commission. The Tax Commission may reject nonapproved forms.(3-15-22)

b.Reproduced forms and photocopies of official Tax Commission forms are acceptable if the weight and size of the paper are comparable to that used in the official forms. These forms and schedules must be sufficiently legible so they may be reproduced.(3-15-22)

IDAPA 35.02.01.151 (Reserved)

IDAPA 35.02.01.153 Tax Preparers -- Alternative Methods of Signing Income Tax Returns

A tax preparer, as defined in Section 48-603B, Idaho Code, may sign an Idaho income tax return in a manner allowed by Internal Revenue Service Notice 2004-54. The requirements for using the alternative methods under Internal Revenue Service Notice 2004-54 must be followed for Idaho income tax purposes if this method of signing a return is used for the Idaho return. Use of the alternative signature for the tax preparer does not alter the requirement for the taxpayer or authorized officer or representative to sign the return as provided in Rule 150 of these rules or to follow the requirements of Section 48-603B, Idaho Code. Section 63-3002, Idaho Code (IRS Notice 2004-54)(3-15-22)

IDAPA 35.02.01.154 (Reserved)

IDAPA 35.02.01.155 Tax Returns and Other Documents Filed Electronically

Sections 63-115, 63-3039, 74-107, Idaho Code Acknowledgment of Data Transmissions. Persons filing returns by electronic data stream may be sent an acknowledgment of receipt of a successfully transmitted return. An acknowledgment means only that the Tax Commission received the return. An acknowledgment is not a finding by the Tax Commission about the correctness of the return. If any transmission is received in an unintelligible, unreadable, or corrupted form and the Tax Commission cannot identify the taxpayer, no acknowledgment will be sent.(3-15-22)

02.Methods Allowed for Filing Motor Fuels Tax Returns Electronically. The following methods are acceptable methods for filing motor fuels tax returns electronically.(3-15-22)

a.Secured methods. Encrypted e-mail secured through public or private key encrypting.(3-15-22)

b.Unsecured methods. Non-encrypted e-mail.(3-15-22)

03.Risks of Disclosure. By filing a return electronically, the taxpayer agrees to the risks of disclosure in submitting information electronically. A taxpayer or third party may not hold the Tax Commission responsible for any loss, liability, damage, whether direct, indirect or consequential, personal injury, or expenses of any nature whatsoever that may be suffered by the taxpayer or any third party as a result of or which may be attributable, directly or indirectly, from transmitting the taxpayer’s information to the Tax Commission.(3-15-22)

IDAPA 35.02.01.156 (Reserved)

IDAPA 35.02.01.200 Examination of Records: Recordkeeping and Production Requirements

Sections 63-3042, 63-3043, Idaho Code A taxpayer shall maintain all records that are necessary to a determination of the correct tax liability. Required records must be made available on request by the Tax Commission or its authorized representatives. (3-15-22)

IDAPA 35.02.01.201 (Reserved)

IDAPA 35.02.01.300 Assessment of Tax

Sections 63-3045, 63-3045A, Idaho Code The Record of Assessment. The record of assessment shall be the Notice and Demand for payment of taxes that also functions as the required notice for the distraint and sale of a taxpayer’s personal property pursuant to Section 63-3057, Idaho Code. For a jeopardy assessment as provided for in Sections 63-3065, 63-3630, and 63-4208, Idaho Code, the Notice of Jeopardy Assessment is the record of assessment. In cases where the tax is self-assessed and no Notice and Demand is issued, the record of assessment shall be the Tax Commission’s processing record of the filing of the self-assessed return.(3-15-22)

02.Admission to Understatement of Tax. A taxpayer may admit to an understatement of tax at any time. An admission is not considered a compromise of tax, and does not affect the statutory period of limitations for an audit or additional assessment or for a claim for refund filed by the taxpayer.(3-15-22)

IDAPA 35.02.01.301 (Reserved)

IDAPA 35.02.01.310 Interest Rates

Sections 63-3045, 63-3073, Idaho Code The annual rate of interest applicable to delinquent taxes accruing or unpaid during all or any part of a calendar year is determined in accordance with Section 63-3045, Idaho Code. The rates are listed at https://tax.idaho.gov/interest.

These interest rates also apply to the allowance of a credit or refund of tax erroneously or illegally assessed or collected as provided in Section 63-3073, Idaho Code.(3-15-22)

IDAPA 35.02.01.311 (Reserved)

IDAPA 35.02.01.320 Notice of Deficiency: Filing a Protest

Section 63-3045, Idaho Code Perfected Protest. The protest must contain the information in Paragraphs a. through d. of this rule to be perfected. A protest meets the requirements of Paragraphs c. and d. of this rule if the allegations of fact or contentions of law, viewed in the light most favorable to the taxpayer, raise factual or legal issues that, if correct, would entitle the taxpayer to relief.(3-15-22)

a.Name, address and pertinent identification number;(3-15-22)

b.The period to which the deficiency relates;(3-15-22)

c.The specific item or items in the Notice of Deficiency to which the taxpayer objects; and (3-15-22)

d.The factual or legal basis for the objections made.(3-15-22)

IDAPA 35.02.01.321 (Reserved)

IDAPA 35.02.01.325 Notice of Deficiency: Protest Procedures

Sections 63-3045, 63-3045B, Idaho Code Hearings. The taxpayer may be accompanied by more than one person, however, the Tax Commission may limit the number of people accompanying the taxpayer. If a protestant fails to comply with a summons or subpoena or fails to appear for the informal conference, the Tax Commission may issue a decision without further hearing.(3-15-22)

02.Request for a Final Decision. A request for a final decision must be in a letter addressed to the employee or agent of the Tax Commission from whom the acknowledgment of the protest was received or to the individual subsequently assigned to resolve the protest. The request must be the sole subject of the letter and must clearly identify the taxpayer and the Notice of Deficiency.(3-15-22)

03.Simultaneous Request for a Final Decision and a Hearing. If the taxpayer makes a simultaneous request for both a final decision and a hearing, the Tax Commission shall treat this as a request for a hearing. The one hundred eighty (180) day period begins when the hearing concludes.(3-15-22)

04.Issues. Redetermination of any tax or refund due is not limited to the specific issue or issues protested for the taxable year, unless limited by Section 63-3068(f), Idaho Code.(3-15-22)

05.Amended Return After Audit. An amended return will be accepted for a taxable year for which a protest is pending only in the following circumstances:(3-15-22)

a.The taxpayer demonstrates that the changes on the amended return are unrelated to issues examined in the audit;(3-15-22)

b.The changes are the result of federal audit adjustments; or(3-15-22)

c.The amended return is submitted as part of the procedure for resolving the protest.(3-15-22)

06.Failure to Schedule a Hearing. The Tax Commission may issue a decision after forty-two (42) days from the date the notification of right to request a hearing is mailed to the taxpayer; if(3-15-22)

a.The taxpayer does not request a hearing;(3-15-22)

b.The taxpayer requests a hearing but does not schedule a date for the hearing; or(3-15-22)

c.A hearing is scheduled but later cancelled by the taxpayer and the taxpayer does not reschedule.

IDAPA 35.02.01.326 (Reserved)

IDAPA 35.02.01.328 Opportunity to Participate: Notice to Petitioner

Section 63-3045, Idaho Code Notification and Participation. If an appeals officer believes a discussion with staff from the originating division is warranted to review matters restricted by Subsection 327.02 of these rules, an appeals officer shall provide petitioner reasonable notice of the time and date of any discussion. Such notice may be provided to the petitioner by telephone, mail or electronic form and pursuant to Section 63-4003, Idaho Code. An appeals officer shall make a reasonable effort to accommodate the petitioner’s schedule but will not unduly delay the discussion. The petitioner may participate by telephone or in-person at the State Tax Commission office in Boise, Idaho, and any discussion will be held during normal business hours.(3-15-22)

02.Additional Petitioner Participation Information. Any discussion held under this rule that includes petitioner participation is not an informal hearing under Rule 325 of these rules and does not start the one hundred and eighty (180) day period for issuing a final decision.(3-15-22)

IDAPA 35.02.01.329 (Reserved)

IDAPA 35.02.01.400 Penalties: General Rules

Sections 63-3033, 63-3046, Idaho Code

01.Penalty Presumed Appropriate. If a taxpayer becomes liable to pay the Internal Revenue Service a penalty similar to one provided in Section 63-3046, Idaho Code, it shall be presumed the penalty is appropriate as part of the related state tax deficiency.(3-15-22)

02.Computation of Tax Due Amounts for Failure to File, Failure to Pay, Delinquent Filing, Substantial Understatement, and Extension Penalties. For purposes of computing the failure to file, failure to pay, substantial understatement, or delinquent filing penalties, provided by Section 63-3046, Idaho Code, and the penalty for failing to meet the extension criteria, provided by Section 63-3033, Idaho Code, the terms tax shown thereon to be due, tax required to be shown on the return, tax due on such return, and the amount on which the extension penalty is applied shall mean amounts computed as follows:(3-15-22)

a.Include the income tax, the permanent building fund tax, tax from recapture of Idaho income tax credits, income tax credits, and any payments for these taxes for that year.(3-15-22)

b.Exclude items reported on the income tax return that are not included in Title 63, Chapter 30, Idaho Code, such as sales or use tax due, fuels tax due, and special fuels or gasoline tax refunds.(3-15-22)

03.Net Operating Loss and Capital Loss Carrybacks. If the tax due for the taxable year is reduced after the application of a net operating loss carryback or a capital loss carryback, the penalty shall be computed on the tax due prior to the application of the carryback.(3-15-22)

IDAPA 35.02.01.401 (Reserved)

IDAPA 35.02.01.410 Negligence Penalties

Section 63-3046(a), Idaho Code Negligence Defined. Negligence is the breach of a duty or obligation, recognized by law, that requires conformance to a certain standard of conduct.(3-15-22)

02.Imposition of Penalty. A five percent (5%) negligence penalty shall be imposed if the deficiency results from either negligence by the taxpayer or from disregard by the taxpayer or his agent of state or federal tax laws, rules of the Tax Commission, or Treasury Regulations. Situations that justify the penalty include but aren’t limited to the following:(3-15-22)

a.Taxpayer continues to make errors in reporting income, sales or assets, or claims erroneous deductions, exemptions, or credits even though these mistakes have been called to his attention in previous audit reports.(3-15-22)

b.Taxpayer fails to maintain proper records and files returns containing unsubstantiated claims or substantial errors.(3-15-22)

c.Taxpayer makes unsubstantiated or exaggerated claims of deductions or exemptions.(3-15-22)

d.Taxpayer fails to offer any explanation for understating taxes.(3-15-22)

e.Unreported taxable income is a material amount as compared with the reported income. (3-15-22)

f.Taxpayer exhibits a careless disregard of his tax obligations.(3-15-22)

g.For sales or use tax deficiencies, failure to keep valid files of resale and exemption certificates.

h.Failure to make the required estimated payment when requesting an extension of time for filing a return.(3-15-22)

i.Taxpayer fails to provide the Tax Commission with a copy of a final federal determination according to Section 63-3069, Idaho Code.(4-6-23)

j.Taxpayer fails to file an Idaho amended return according to Section 63-3069, Idaho Code. (4-6-23)

k.Taxpayer fails to respond to requests to produce records substantiating items shown on the return.

l.Taxpayer fails to make available the fifty-one (51) state apportionment factor detail when requested.(3-15-22)

03.Negligence Penalty for Sales and Use Tax Deficiencies. For sales tax purposes, pertinent computations relating to substantial errors in Subsection 410.02.b. or material amount in Subsection 410.02.e., might include the following:(3-15-22)

a.The ratio of untaxed sales that should have been taxed to total taxable sales;(3-15-22)

b.The ratio of untaxed sales that should have been taxed to total sales;(3-15-22)

c.The ratio of untaxed purchases subject to use tax to total taxable purchases and to total purchases; or(3-15-22)

d.Other computations bearing on negligence.(3-15-22)

04.Waiver of Negligence Penalty. The Tax Commission shall consider all factors when determining whether to waive a negligence penalty. One (1) factor is the taxpayer’s record for filing and paying state taxes. A good record for filing and paying tax on returns filed annually is not by itself a sufficient reason to waive the penalty.

05.Circumstances Precluding Waiver of Penalty. The following circumstances do not constitute sufficient cause to waive the penalty:(3-15-22)

a.An invalid or unapproved request for an extension of time to file or to do acts required by Idaho tax laws;(3-15-22)

b.An unsettled dispute between the Tax Commission and the taxpayer concerning a tax liability; or

c.Inability to pay the tax.(3-15-22)

IDAPA 35.02.01.411 (Reserved)

IDAPA 35.02.01.420 Fraud Penalties

Section 63-3046(b), Idaho Code Assessm ent of the fraud penalty precludes assessment of the negligence penalty on the deficiency.(3-15-22)

IDAPA 35.02.01.421 (Reserved)

IDAPA 35.02.01.430 Penalty for Failure to File, Failure to Pay, or Delinquent Filing

Sections 63-3033, 63-3046, Idaho Code In General. Due date means the date prescribed for filing without regard to extensions. (3-15-22)

02.Insufficient Postage. The proper amount of prepaid postage is required on returns mailed to the Tax Commission. If a tax return is returned to the sender due to insufficient postage, it may result in the return becoming delinquent and subject to the delinquency penalty specified by Section 63-3046(c), Idaho Code. (3-15-22)

03.Month Defined. If the due date falls on the last day of a calendar month, each succeeding calendar month, or fraction of it, during which the failure to file continues constitutes a month. If the due date is not the last day of the calendar month, the period that ends with the same date of the next month constitutes a month. If the succeeding month has no corresponding date, the last day of the month is substituted. Any fraction of a month from the date ending the preceding monthly period to the date of payment constitutes a full month.(3-15-22)

IDAPA 35.02.01.431 (Reserved)

IDAPA 35.02.01.500 Settlements

Sections 63-3047, 63-3048, Idaho Code Grounds for Settlement. The Tax Commission may settle any taxes, penalties, or interest of a case if one (1) or more of the following circumstances exist:(3-15-22)

a.Disputed liability,(3-15-22)

i.A disputed liability exists where there is a reasonable disagreement as to the existence or amount of the correct tax liability under the law. A disputed liability does not exist where the liability has been established by a final court judgment concerning the existence of the liability.(3-15-22)

ii.An offer to settle a disputed liability generally will be considered acceptable if it reasonably reflects the likelihood the Commission could expect to collect through litigation. This analysis includes consideration of the hazards and costs of litigation that would be involved if the liability were litigated. The evaluation of the hazards and costs of litigation is not an exact science and is within the discretion of the Commission.(3-15-22)

b.Doubt as to collectibility;(3-15-22)

i.Doubt as to collectibility exists in any case where the taxpayer's assets and income may not satisfy the full amount of the liability.(3-15-22)

ii.An offer to settle based on doubt as to collectibility generally will be considered acceptable if it is unlikely that the tax, penalty, and interest can be collected in full and the offer reasonably reflects the amount the Commission could collect through other means, including administrative and judicial collection remedies. This amount is the reasonable collection potential of a case. In determining the reasonable collection potential of a case, the Commission will take into account the taxpayer's reasonable basic living expenses. In some cases, the Commission may accept an offer of less than the total reasonable collection potential of a case if there are special circumstances.(3-15-22)

c.Economic hardship of the taxpayer.(3-15-22)

i.The Commission may settle where it determines that, although collection in full could be achieved, collection of the full amount would cause the taxpayer economic hardship. Economic hardship is defined as the inability to pay reasonable basic living expenses.(3-15-22)

ii.An offer to settle based on economic hardship generally will be considered acceptable when, even though the tax, penalty, and interest could be collected in full, the amount offered reflects the amount the Commission can collect without causing the taxpayer economic hardship. The determination to accept a particular amount will be based on the taxpayer's individual facts and circumstances.(3-15-22)

d.Promotion of effective tax administration.(3-15-22)

i.The Commission may settle to promote effective tax administration where compelling public policy or equity considerations identified by the taxpayer provide a sufficient basis for settling the liability that is equitable under the particular facts and circumstances of the case. Settlements pursuant to this paragraph will be justified only where, due to exceptional circumstances, collection of the full liability may undermine public confidence that the tax laws are being administered in a fair and equitable manner. The taxpayer will be expected to demonstrate circumstances that justify settlement even though a similarly situated taxpayer may have paid his liability in full.(3-15-22)

ii.The State Tax Commission may decline a settlement for reasons promoting effective tax administration if the settlement of the liability would undermine compliance by taxpayers with the tax laws.

02.Agreement Final. A settlement agreement relates to the issues agreed to for the tax periods in question. The agreement is final and conclusive and neither the Tax Commission nor the taxpayer will be permitted to open the case again except in the case of changes to the federal return or a showing of fraud or malfeasance or misrepresentation of a material fact or as provided in the agreement. Recalculation of carryback or carryover items may not be construed as opening the case and will not affect the tax liability of a closed period or closed issue.

03.Form of Settlement. The taxpayer must submit an offer to settle in writing. An offer may not be considered accepted until the taxpayer is notified in writing. Acceptance may be made only by a Tax Commissioner or an authorized delegate. If the offer is rejected, the Tax Commission will promptly notify the taxpayer.(3-15-22)

04.Withdrawal of Offer. A taxpayer may withdraw his offer to settle at any time prior to its acceptance by the Tax Commission.(3-15-22)

IDAPA 35.02.01.501 Procedures on Settlements Over Fifty Thousand Dollars

Section 63-3048, Idaho Code

01.Amount in Issue. The amount in issue is defined as the Notice of Deficiency amount, plus or minus any adjustments previously communicated in writing to the taxpayer, minus the proposed settlement amount.

For purposes of the amount in issue, interest will be updated to the date of the offer.(3-15-22)

02.Written Summary.

This summary does not preclude the Commission from seeking a separate analysis from other agents of the Commission. Such files may not be disclosed or inspected under the public records

law.(3-15-22)

03.Final Review When the Offer to Settle is Based on Inability to Pay. If the taxpayer’s offer is based on inability to pay, a representative of the Collection Division will be provided a copy of the Written Summary and given an opportunity to participate in the final review. The representative attending the final review on behalf of the Collection Division will be the division administrator or the designee.(3-15-22)

IDAPA 35.02.01.502 (Reserved)

IDAPA 35.02.01.700 Disclosure of Information: Scope

Sections 63-3076, 63-3077, Idaho Code

01.Examples.The following are examples of information not considered return information for purposes of Rules 700 through 709 of these rules:(3-15-22)

a.Decisions published pursuant to Section 63-3045B, Idaho Code;(3-15-22)

b.Data in a form that cannot be associated with or otherwise identify, directly or indirectly, a particular taxpayer.(3-15-22)

IDAPA 35.02.01.701 (Reserved)

IDAPA 35.02.01.702 Disclosure of Information: Third Parties

Sections 63-3076 and 63-3077, Idaho Code In General. The Tax Commission may not disclose returns or return information about a taxpayer to any person other than that taxpayer or an authorized representative of the taxpayer except as provided by statute or rule.(3-15-22)

02.Written Authorization to Disclose Information.(3-15-22)

a.The Tax Commission may disclose a taxpayer’s returns or return information to a person designated in writing by that taxpayer.(3-15-22)

b.The written authorization must contain:(3-15-22)

i.The taxpayer’s name, address and social security number, employer identification number, or other identifying number that relates to the returns or return information to be disclosed;(3-15-22)

ii.The name and address of the person to whom disclosure is authorized;(3-15-22)

iii.Language indicating the taxpayer’s consent to disclosure of information;(3-15-22)

iv.The tax period or periods for which disclosure may be made; and(3-15-22)

v.The signature of the taxpayer, or if the taxpayer is a corporation or other business organization or an entity other than an individual, the signature of an authorized employee or officer of the taxpayer.(3-15-22)

c.A written complaint or inquiry by a taxpayer to an elected official of the executive or legislative branches of state or federal government relating to the Tax Commission’s actions or positions relating to that taxpayer is an authorization for the Tax Commission to disclose information relevant to the complaint or inquiry to the official, or the official’s delegate.(3-15-22)

03.Audits or Investigations. Tax Commission employees and authorized agents may make inquiries of any person or any employee of a person to collect or ascertain any tax liability, to determine the correctness of a return or return information, or for any other purpose relating to the Tax Commission’s duties of administering or enforcing Idaho tax laws. Disclosures necessary to these inquiries are authorized.(3-15-22)

04.Testimony in Judicial or Administrative Proceedings. If a Tax Commissioner, Tax Commission employee or agent is required to appear in court in an action where the Commission, employee or agent is not a party or where taxation is not in issue, by subpoena or otherwise, he may appear but shall refuse to testify without written authorization from the taxpayer, and may object to his appearance on the basis of this rule and Section 63-3076, Idaho Code. Information requested in a subpoena issued by a United States Grand Jury shall be provided.(3-15-22)

IDAPA 35.02.01.703 Disclosure of Information: General Public

Sections 63-3076, 63-3077, Idaho Code Public Information. The Tax Commission may disclose information about a taxpayer that is public information. This includes information introduced as evidence in any court, before the Board of Tax Appeals, through the filing of liens, or through publication other than by the Tax Commission.(3-15-22)

02.Correction of Information. The Tax Commission, after notifying the taxpayer, may disclose information necessary to correct misleading statements or misrepresentations publicized by the taxpayer or his agents or employees regarding his liability to the state of Idaho, his conduct in relation to the Tax Commission, or proceedings, audits or investigations of the taxpayer by the Tax Commission.(3-15-22)

IDAPA 35.02.01.704 Disclosure of Information: Government Agencies and Officials

Sections 23-907, 39-8405, 49-326, 50-1049, 54-1904A, 56-231, 63-602G, 63-2442, 63-3029B, 63-3077, 63-3077A, 63-3077B, 63-3077C, 63-3077D, 63-3077E, 63-3077G, 63-3077H, 63-3634A, 67-4917C, Idaho Code

01.Legislature. The Tax Commission will disclose returns or return information to the Idaho Legislature on the written request of the chair of any committee of either branch of the Idaho Legislature on behalf of the committee. When authorized by statute, the Tax Commission will disclose information to the Legislative Council, the Joint Legislative Oversight Committee, or to the Joint Finance and Appropriations Committee.(3-15-22)

02.Government Agencies or Officials. The Tax Commission will disclose information necessary to comply with provisions of the Idaho Code requiring reports or information to be provided to government agencies or officials. This includes the disclosure of tax returns and return information for use in enforcing child support obligations pursuant to Section 56-231, Idaho Code.(3-15-22)

03.Exchange of Information. Information may be exchanged between the Tax Commission and:

a.The Internal Revenue Service, as allowed by Sections 63-3077(1)(a) and 63-3077D, Idaho Code;

b.Other states, if reciprocal provisions for information exchanges are granted under Section 63- 3077(1)(b), Idaho Code;(3-15-22)

c.Multistate Tax Commission, as allowed by Section 63-3077(1)(b), Idaho Code;(3-15-22)

d.Financial Management Services of the U. S. Department of the Treasury, as allowed by Sections 63-3077(1)(a) and 63-3077D, Idaho Code;(3-15-22)

e.Governing entity of the International Fuel Tax Agreement, IFTA, Inc., as allowed by Section 63- 3077(1)(b), Idaho Code;(3-15-22)

IDAPA 35.02.01.705 Disclosure of Information -- Identity Theft

Section 63-3077F, Idaho Code Written Information Request. The Tax Commission may disclose the name and address to the victim upon receipt of a valid written information request.(3-15-22)

a.The written request must contain:(3-15-22)

i.The victim’s name, address, and social security number or other tax identification number;

ii.The tax year affected;(3-15-22)

iii.The signature of the victim or legal representative;(3-15-22)

iv.Copies of the victim’s driver’s license and social security card or passport, if applicable. (3-15-22)

v.If the victim is a minor, a copy of the birth certificate along with the driver’s license or passport of the parent or legal guardian.(3-15-22)

vi.If the victim is deceased, a copy of the legal document authorizing the executor of the estate along with the executor’s driver’s license or passport.(3-15-22)

IDAPA 35.02.01.706 (Reserved)

IDAPA 35.02.01.800 Definitions for Purposes of the Taxpayers' Bill of Rights

Title 63, Chapter 40, Idaho Code

01.Collection and Enforcement. The terms collection and enforcement include only post-assessment processes.(3-15-22)

02.Publication. Publication means communicating to the general public. Publication does not include internal communication or communication with other governmental agencies as provided for by statute.(3-15-22)

03.Written Notification of Representation. A taxpayer’s written notification that he will be represented by another person must include the information required for a valid power of attorney. If the notification is not valid, the revenue officer shall communicate with the taxpayer. The revenue officer should exercise reasonable care in determining whether a power of attorney exists.(3-15-22)

IDAPA 35.02.01.801 (Reserved)

35.01.01 Income Tax Administrative Rules

IDAPA 35.01.01.000 Legal Authority

In accordance with Sections 63-105 and 63-3039, Idaho Code, the State Tax Commission (Tax Commission) has promulgated rules implementing the provisions of the Idaho Income Tax Act.(4-6-23)

IDAPA 35.01.01.001 Scope

Section 63-3039, Idaho Code.

Scope. These rules will be construed to reach the full jurisdictional extent of the state of Idaho’s authority to impose a tax on income of all persons who derive income from Idaho sources or who enjoy benefits of Idaho residence.(4-6-23)

02.Effective Date. To the extent allowed by statute, rules in this chapter will be applied on their effective date to all taxable years open for determining tax liability.(4-6-23)

3. Closed Years or Issues. Taxable years closed by the statute of limitations remain closed and are not reopened by the promulgation, repeal or amendment of any rule. Issues resolved by the expiration of appeal time, a notice of deficiency determination, or a final decision of the Tax Commission will not be reopened by the promulgation, repeal, or amendment of any rule.(4-6-23)

4. Transactions Before an Effective Date. A rule will not be applied to transactions occurring before its effective date in a case where, in the opinion of the Tax Commission, to do so would create an obvious injustice.

IDAPA 35.01.01.002 Incorporation by Reference (rule 002)

These rules incorporate by reference the following documents, which may be obtained from the main office of the Tax Commission:(4-6-23)

01.MTC Special Industry Regulations. These documents are found on the Multistate Tax Commission (MTC) Website at http://www.mtc.gov/Uniformity/Adopted-Uniformity-Recommendations, or can be obtained by contacting the MTC, 444 N. Capitol Street, NW, Suite 425, Washington, DC 20001. See Rules 580 and 581 of these rules.(4-6-23)

02.MTC Recommended Formula for the Apportionment and Allocation of Net Income of Financial Institutions. This rule incorporates the MTC Recommended Formula for the Apportionment and Allocation of Net Income of Financial Institutions as adopted November 17, 1994. This document is found on the MTC Website at http://www.mtc.gov/uploadedFiles/Multistate_Tax_Commission/Uniformity/Uniformity_Projects/ A_-_Z/FormulaforApportionmentofNetIncomeFinInst.pdf or can be obtained by contacting the MTC, 444 N. Capitol Street, NW, Suite 425, Washington, DC 20001. See Rule 582 of these rules.(4-6-23)

IDAPA 35.01.01.003 (Reserved)

IDAPA 35.01.01.010 Definitions (rule 010)

Section 63-3003, Idaho Code Due Date. As used in these rules, due date means the date prescribed for filing without regard to extensions.(4-6-23)

02.Mathematical Error. A mathematical error includes arithmetic errors and incorrect computations.

03.Sale. A sale is defined as a transaction in which title passes from the seller to the buyer, or when possession and the burdens and benefits of ownership are transferred to the buyer. A sale may have occurred even if the buyer does not have the right to possession until he partially or fully satisfies the terms of the contract.(4-6-23)

04.Tax Home. For income tax purposes, the term tax home refers to the taxpayer’s principal place of business, employment, station, or post of duty regardless of where he maintains his personal or family residence. A taxpayer domiciled or residing in Idaho with a permanent post of duty in another state is an Idaho resident for Idaho income tax purposes. However, he is not entitled to a deduction for travel expenses incurred in the other state since that is his tax home.(4-6-23)

05.Terms. Terms not otherwise defined in the Idaho Income Tax Act or these rules will have the same meaning as is assigned to them by the Internal Revenue Code including Section 7701 relating to definitions of terms.

06.Wages. The term wages relates to all compensation for services performed for an employer regardless of the form of payment.(4-6-23)

IDAPA 35.01.01.011 (Reserved)

IDAPA 35.01.01.015 Internal Revenue Code (rule 015)

Section 63-3004, Idaho Code Interpretations. Interpretations of the Internal Revenue Code may be found in various sources.

These sources include decisions of the Tax Court, Congressional Committee Reports, General Counsel Memoranda, Decisions of the Federal and State Courts on federal income tax issues and Treasury Regulations. These interpretations are adopted by this reference to the extent that they are not in conflict with or inconsistent with the Idaho Code or administrative rules.(4-6-23)

02.Retroactive Amendments. For the purpose of determining federal taxable income, any retroactive amendments to the Internal Revenue Code that are enacted on or before the date found in Section 63-3004, Idaho Code, are applied retroactively to the extent allowed under federal law.(4-6-23)

03.Tax Commission Granted Discretion in Determining Correctness of Tax Return. Discretion granted to the Secretary of the Treasury to determine or reallocate items of income or adjustments to income, deductions, expenses, credits or other subjects of taxation by the Internal Revenue Code may also be exercised by the Tax Commission and its authorized agents, employees and deputies to enforce and administer the Idaho Income Tax Act and these rules.(4-6-23)

IDAPA 35.01.01.016 Idaho Gross Income (rule 016)

Sections 63-3011 and 63-3030, Idaho Code In General. Gross income means all income from whatever source derived, unless specifically excluded by the Internal Revenue Code.(4-6-23)

02.Gross Income from Pass-Through Entities. Gross income includes an owner’s share of a passthrough entity’s gross income pursuant to sections 702(c) and 1366(c) of the Internal Revenue Code, and federal Treasury Regulation Section 1.61-13 (citing Part I, Subchapter J, Chapter 1 of the Internal Revenue Code). (4-6-23)

03.Gross Income from Idaho Sources. Gross income from Idaho sources is that portion of total gross income derived from or related to sources within Idaho. Income derived from or related to sources within Idaho is determined pursuant to this rule and Rules 263 through 286 of these rules.(4-6-23)

04.Idaho Source Gross Income from a Pass-Through Entity.(4-6-23)

a.Partnership. The amount of a partner’s gross income from Idaho sources is:(4-6-23)

i.The partner’s distributive share of partnership gross income included in the partnership’s apportionable income multiplied by the Idaho apportionment factor of the partnership; and(4-6-23)

ii.The partner’s distributive share of gross income allocated to Idaho.(4-6-23)

b.S Corporation. The amount of a shareholder’s gross income from Idaho sources is:(4-6-23)

i.The shareholder’s pro rata share of the S corporation gross income included in the S corporation’s apportionable income multiplied by the Idaho apportionment factor of the S corporation; and(4-6-23)

ii.The shareholder’s pro rata share of gross income allocated to Idaho.(4-6-23)

c.Trust or Estate. The Idaho source portion of the income that constitutes gross income pursuant to federal Treasury Regulation Section 1.61-13 and Part I, Subchapter J, Chapter 1 of the Internal Revenue Code, is the amount of such income that would be Idaho source if received directly by the individual.(4-6-23)

IDAPA 35.01.01.017 Treatment of the Section 965 of the Internal Revenue Code Increase in

SUBPART F INCOME AND RELATED EXCLUSIONS (RULE 017).

Section 63-3002, Idaho Code Su bpart F income as defined in Section 952, Internal Revenue Code, is gross income under Section 951(a), Internal Revenue Code, and included in a taxpayer’s taxable income under the Internal Revenue Code. Idaho taxpayers must include the Section 965, Internal Revenue Code, increase in their subpart F income (Section 965(a) reduced by Section 965(c), Internal Revenue Code), when computing their Idaho taxable income regardless of how such income is reported to the Internal Revenue Service on the federal income tax form.(4-6-23)

IDAPA 35.01.01.018 (Reserved)

IDAPA 35.01.01.025 Taxable Year and Accounting Period (rule 025)

Section 63-3010, Idaho Code In General. A taxpayer will file his Idaho return for the same taxable year as filed for federal income tax purposes. If a federal return is not filed, the taxable year will be the taxable year required by the Internal Revenue Code, any other period that may be required by law, or the calendar year. Taxable year generally corresponds to the taxpayer’s annual accounting period unless a short-period return is required.(4-6-23)

02.Change of Accounting Period.(4-6-23)

a.If a taxpayer changes his accounting period for federal income tax purposes, he will make the same change for the same period for Idaho income tax purposes. If prior approval of the Commissioner of the Internal Revenue Service is required, a copy of that approval will accompany the Idaho short-period return.(4-6-23)

b.If a change does not require prior approval of the Commissioner of the Internal Revenue Service, the change will be noted on the Idaho short-period return, along with a statement that no prior approval was required and the authority cited.(4-6-23)

IDAPA 35.01.01.026 (Reserved)

IDAPA 35.01.01.030 Resident (rule 030)

Section 63-3013, Idaho Code Resident. The term resident applies to individuals, estates, and trusts.(4-6-23)

02.Domicile. The term domicile means the place where an individual has his true, fixed, permanent home and principal establishment, and where he intends to return when absent. An individual can have several residences or dwelling places, but he legally has only one domicile at a time.(4-6-23)

a.Domicile, once established, is never lost until there is a concurrence of a specific intent to abandon an old domicile, an intent to acquire a specific new domicile, and the actual physical presence in a new domicile.

b.All individuals who have been domiciled in Idaho for the entire taxable year are residents for Idaho income tax purposes, even though they have actually resided outside Idaho during all or part of the taxable year, except as provided in Section 63-3013(2), Idaho Code.(4-6-23)

c.Any individual meeting the safe harbor exception to residency status is either a nonresident or partyear resident.(4-6-23)

d.The safe harbor exception to being a resident of Idaho does not apply to a servicemember or a servicemember’s spouse domiciled in Idaho if the Servicemembers Civil Relief Act applies to the individual.

IDAPA 35.01.01.031 Aliens (rule 031)

Sections 63-3013, 63-3013A, and 63-3014, Idaho Code

01.Idaho Residency Status. For purposes of the Idaho Income Tax Act, an alien may be either a resident, part-year resident, or nonresident, except a nonresident alien as defined in Section 7701, Internal Revenue Code, will be a nonresident.(4-6-23)

a.An alien will determine his Idaho residency status using the tests set forth in Sections 63-3013, 63- 3013A, and 63-3014, Idaho Code.(4-6-23)

b.A nonresident alien as defined in Section 7701, Internal Revenue Code, is a nonresident for Idaho.

If a nonresident alien has elected to be treated as a resident of the United States for federal income tax purposes, he will determine his Idaho residency status as provided in Paragraph 031.01.a., of this rule.(4-6-23)

02.Filing Status. An alien will use the same filing status for the Idaho return as used on the federal return. If for federal income tax purposes a married alien files as a nonresident alien and does not elect to be treated as a resident, the married alien will use the filing status married filing separate on the Idaho return.(4-6-23)

03.Copy of Federal Forms Required. In addition to the requirements set forth in Rule 800 of these rules, a nonresident alien will attach a copy of the following forms to his Idaho individual income tax return:(4-6-23)

a.Form 8843 if filed with the IRS;(4-6-23)

b.All Forms 1042-S received for the taxable year.(4-6-23)

IDAPA 35.01.01.032 Members of the Uniformed Services (rule 032)

Section 63-3013, Idaho Code Servicemembers Civil Relief Act. Section 511 of the Servicemembers Civil Relief Act (50 U.S.C.

App. Section 571) provides that a servicemember will neither lose nor acquire a residence or domicile with regard to his income tax as a result of being absent or present in a state due to military orders.(4-6-23)

02.Servicemember. A servicemember is defined to include any member of the uniformed services as that term is defined in 10 U.S.C. Section 101(a)(5). A member of the uniformed services includes:(4-6-23)

a.A member of the armed forces, which includes a member of the Army, Navy, Air Force, Marine Corps, or Coast Guard on active duty. It also includes a member of the National Guard who has been called to active service by the President of the United States or the Secretary of Defense of the United States for a period of more than thirty (30) consecutive days under 32 U.S.C. Section 502(f), for purposes of responding to a national emergency declared by the President and supported by federal funds.(4-6-23)

b.The commissioned corps of the National Oceanic and Atmospheric Administration in active service; and(4-6-23)

c.The commissioned corps of the Public Health Service in active service.(4-6-23)

03.Idaho Residency Status.(4-6-23)

a.A servicemember does not become an Idaho resident for income tax purposes by reason of being present in Idaho solely in compliance with military orders.(4-6-23)

b.A servicemember does not lose his status as an Idaho resident for income tax purposes by reason of being absent from Idaho solely in compliance with military orders. The safe harbor exception to being a resident as provided in Section 63-3013(2), Idaho Code, does not apply to a servicemember covered by the federal law. (4-6-23)

c.If a servicemember is present in or absent from Idaho for reasons other than compliance with military orders, the standard analysis of residency under Sections 63-3013, 63-3013A, and 63-3014, Idaho Code, applies.(4-6-23)

04.Military Service Compensation.(4-6-23)

a.Section 511 of the Servicemembers Civil Relief Act (50 U.S.C. App. Section 571) provides that the military service compensation of a servicemember who is not domiciled in Idaho is not considered income from Idaho sources.(4-6-23)

b.The military service compensation of a servicemember who is domiciled in Idaho is subject to Idaho income tax. However, Section 63-3022(h), Idaho Code, provides that compensation paid to a member of the United States Armed Forces for active-duty military service performed outside Idaho is deducted from taxable income in determining the member’s Idaho taxable income. A member of the armed forces does not include the commissioned corps of the National Oceanic and Atmospheric Administration or the commissioned corps of the Public Health Service, unless they have been militarized by Presidential Executive Order under Title 42, United States Code.(4-6-23)

05.Military Separation Pay. Military separation pay received for voluntary or involuntary separation from active military service is not considered military service compensation. Therefore, Subsection 032.04 of this rule does not apply.(4-6-23)

a.Military separation pay is included in Idaho taxable income only if the recipient is domiciled in or residing in Idaho when the separation pay is received.(4-6-23)

b.For purposes of this rule, a former active duty servicemember whose home of record at the time of separation from the military was a state other than Idaho is not deemed to be residing in Idaho if he moves from Idaho within thirty (30) days from the date of separation from active duty.(4-6-23)

06.Nonmilitary Income. All Idaho source income earned by a servicemember is subject to Idaho taxation except as expressly limited by the Idaho Income Tax Act and these rules.(4-6-23)

07.Spouses of Servicemembers. Beginning on January 1, 2009, Section 511 of the Servicemembers Civil Relief Act also applies to the spouse of a servicemember.(4-6-23)

a.If a spouse of a servicemember has the same domicile or state of residency for tax purposes as the servicemember, the spouse of the servicemember does not become an Idaho resident for income tax purposes by reason of being present in Idaho solely to be with the servicemember who is stationed in Idaho.(4-6-23)

b.If a spouse of a servicemember and the servicemember are both Idaho residents for income tax purposes, the spouse of the servicemember does not lose his status as an Idaho resident for income tax purposes by reason of being absent from Idaho solely to be with the servicemember who is stationed outside of Idaho.(4-6-23) c.

If the spouse is not a resident of Idaho for income tax purposes because of the reason stated in Paragraph 032.07.a. of this rule, income for services performed in Idaho by the spouse will not be deemed to be income from Idaho sources.(4-6-23)

IDAPA 35.01.01.033 American Indians (rule 033)

Section 63-3022S, Idaho Code Idaho Residency Status. An American Indian must determine his Idaho residency status using the tests set forth in Sections 63-3013, 63-3013A, and 63-3014, Idaho Code. Membership in an Indian tribe does not affect that individual’s Idaho residency status.(4-6-23)

02.Gambling Winnings.(4-6-23)

a.Amounts received from gambling on an Indian reservation by an enrolled member who lives on the Indian reservation are not subject to Idaho tax.(4-6-23)

b.Amounts received from gambling on an Indian reservation by an enrolled member who lives off the Indian reservation in Idaho are subject to Idaho tax.(4-6-23)

03.Per Capita Distributions.(4-6-23)

a.Per capita distributions paid by an Indian tribe to an enrolled member who lives on the Indian reservation are tax-exempt by Idaho.(4-6-23)

b.Per capita distributions paid by an Indian tribe to an enrolled member who resides off the reservation in Idaho are subject to Idaho tax.(4-6-23)

IDAPA 35.01.01.034 Estate -- Residency Status (rule 034)

Section 63-3015, Idaho Code Resident Estates. If the estate is other than an estate of a decedent, it is treated as a resident estate if the person for whom the estate was created is a resident of Idaho.(4-6-23)

IDAPA 35.01.01.035 (Reserved)

IDAPA 35.01.01.040 Part-Year Resident (rule 040)

Section 63-3013A, Idaho Code 1.Temporary or Transitory Purpose. For purposes of this rule, an individual is not residing in Idaho if he is present in Idaho only for a temporary or transitory purpose. Likewise, an individual is not residing outside Idaho merely by his temporary or transitory absence from Idaho.(4-6-23)

a.The length of time in Idaho is only one factor in determining whether an individual is present for other than a temporary or transitory purpose. Other factors to be considered include business activity or employment conducted in Idaho, banking and other financial dealings taking place in Idaho, and family and social ties in Idaho. In general, an individual is present for other than a temporary or transitory purpose if his stay is related to a significant business, employment or financial purpose or the individual maintains significant family or social ties in Idaho.

b.An individual is present in Idaho only for a temporary or transitory purpose if he does not engage in any activity or conduct in Idaho other than that of a vacationer, seasonal visitor, tourist, or guest.(4-6-23)

c.Presence in Idaho for ninety (90) days or more during a taxable year is presumed to be for other than a temporary or transitory purpose. To overcome the presumption, the individual must show that his presence was consistent with that of a vacationer, seasonal visitor, tourist or guest.(4-6-23)

02.Place of Abode. An individual who owns a home in Idaho will not be treated as having a place of abode at that residence if the individual does not have the right to immediately occupy that residence. This definition does not apply for purposes of the federal foreign income exclusion and only applies for purposes of Sections 63- 3013 and 63-3013A, Idaho Code.(4-6-23)

IDAPA 35.01.01.041 (Reserved)

IDAPA 35.01.01.045 Nonresident (rule 045)

Sections 63-3014, 63-3026A, Idaho Code Traveling Salesmen.(4-6-23)

a.A nonresident salesman who works in Idaho is subject to Idaho taxation regardless of the location of his post of duty or starting point.(4-6-23)

b.If an individual is paid on a mileage basis, the gross income from sources within Idaho includes that portion of the total compensation for personal services that the number of miles traveled in Idaho bears to the total number of miles traveled within and without Idaho. If the compensation is based on some other measure, such as hours, the total compensation for personal services must be apportioned between Idaho and other states and foreign countries in a manner that allocates to Idaho the portion of total compensation reasonably attributable to personal services performed in Idaho. See Rule 270 of these rules.(4-6-23)

02.Motor Carrier Employees Covered by Title 49, Section 14503, United States Code.

Compensation paid to an interstate motor carrier employee who has regularly assigned duties in more than one state is subject to income tax only in the employee’s state of residence. A motor carrier employee is defined in Title 49, Section 31132(2), United States Code, and includes:(4-6-23)

a.An operator, including an independent contractor, of a commercial motor vehicle;(4-6-23)

b.A mechanic;(4-6-23)

c.A freight handler; and(4-6-23)

d.An individual, other than an employer, who in the course of his employment directly affects commercial motor vehicle safety. Employees of the United States, a state, or a local government are not included.

Employer, as used in this rule, means a person engaged in business affecting interstate commerce that owns or leases a commercial motor vehicle in connection with that business, or assigns an employee to operate it. See Title 49, Section 31132(3), United States Code.(4-6-23)

03.Water Carrier Employees Covered by Title 46, Section 11108, United States Code.

Compensation paid to a water carrier employee is subject to income tax only in the employee’s state of residence if such employee:(4-6-23)

a.Is engaged on a vessel to perform assigned duties in more than one (1) state as a pilot licensed under Title 46, Section 7101, or licensed or authorized under the laws of a state; or(4-6-23)

b.Performs regularly assigned duties while engaged as a master, officer, or crewman on a vessel operating on the navigable waters of more than one (1) state.(4-6-23)

04.Air Carrier Employees Covered by Title 49, Section 40116(f), United States Code.

Compensation paid to an air carrier employee who has regularly assigned duties on aircraft in more than one state is subject to the income tax laws of only:(4-6-23)

a.The employee’s state of residence, and(4-6-23)

b.The state in which the employee earns more than fifty percent (50%) of the pay from the air carrier.

05.Rail Carrier Employees Covered by Title 49, Section 11502, United States Code.

Compensation paid to an interstate rai l carrier employee who performs regularly assigned duties on a railroad in more than one (1) state is subject to income tax only in the employee’s state of residence.(4-6-23)

06.Pension Income Covered by Title 4, Section 114, United States Code. Pension income, including certain guaranteed payments made to a retired partner of a partnership, per Title 4, Section 114(b)(1)(I), United States Code, is subject to income tax only in the individual’s state of residence or domicile.(4-6-23)

IDAPA 35.01.01.046 (Reserved)

IDAPA 35.01.01.075 Tax on Individuals, Estates, and Trusts (rule 075)

Section 63-3024, Idaho Code The tax rates applied to the Idaho taxable income of an individual, trust or estate are listed at https://tax.idaho.gov/ indrate. The maximum tax rate as listed for the applicable taxable year applies in computing the tax attributable to the S corporation stock held by an electing small business trust.(4-6-23)

IDAPA 35.01.01.076 (Reserved)

IDAPA 35.01.01.078 Tax on Trusts -- Electing Small Business Trusts (rule 078)

Section 63-3024, Idaho Code In General. The special rules for taxation of electing small business trusts as provided in Section 641, Internal Revenue Code, will apply for purposes of computing the Idaho income tax. These rules include the following:(4-6-23)

a.The portion of an electing small business trust that consists of stock in one (1) or more S corporations will be treated as a separate trust.(4-6-23)

b.The tax on the separate trust will be determined with the following modifications from the usual rules for taxing trusts:(4-6-23)

i.The only items of income, loss, deduction, or credit to be taken into account are the items required to be taken into account as an S corporation shareholder under Section 1366, Internal Revenue Code, and any gain or loss from the disposition of stock in an S corporation.(4-6-23)

ii.As provided in federal Treasury Regulations, administrative expenses will be taken into account to the extent allocable to the items described in Subparagraph 078.01.b.i.(4-6-23)

iii.A deduction or credit will be allowed only for an amount described in this paragraph. No item described in this paragraph will be apportioned to any beneficiary.(4-6-23)

c.A capital loss deduction provided by Section 1211(b), Internal Revenue Code, will be allowed only to the extent of capital gains.(4-6-23)

IDAPA 35.01.01.079 (Reserved)

IDAPA 35.01.01.105 Adjustments to Taxable Income -- Additions Required of All Taxpayers

(RULE 105).

Section 63-3022, Idaho Code. The following must be added by all taxpayers in computing Idaho taxable income.

( 4-6-23)

01.Interest and Dividend Income Exempt From Federal Taxation. Certain interest and dividend income that is exempt from federal income tax must be added.(4-6-23)

a.If a taxpayer has both Idaho and non-Idaho state and municipal interest income, expenses not allowed pursuant to Sections 265 and 291, Internal Revenue Code, must be prorated between the Idaho and non- Idaho interest income as provided in Subsections 105.04.b.i. and 105.04.b.ii. The addition to taxable income required for non-Idaho state and municipal interest income must be offset by the expenses prorated to that interest income. The allowable offset may not exceed the reportable amount of interest income. An unused offset may not be carried back or carried over. A schedule showing the interest and related offsets must be attached to the return.(4-6-23)

i.Expenses prorated to Idaho state and municipal interest income are based on the ratio of Idaho state and municipal interest income to total state and municipal interest income.(4-6-23)

ii.Expenses prorated to non-Idaho state and municipal interest income are based on the ratio of non- Idaho state and municipal interest income to total state and municipal interest income.(4-6-23)

02.Special First-Year Depreciation Allowance. The amount of depreciation computed for federal income tax purposes that exceeds the amount of depreciation computed for Idaho income tax purposes must be added.(4-6-23)

IDAPA 35.01.01.106 (Reserved)

IDAPA 35.01.01.107 Adjustments to Taxable Income -- Adjustments Required Only of

TAXPAYERS REPORTING NONBUSINESS INCOME (RULE 107).

Section 63-3027(a)(4), Idaho Code. All deductions relating t o the production of nonbusiness income will be allocated with the income produced.(4-6-23)

IDAPA 35.01.01.108 (Reserved)

IDAPA 35.01.01.115 Interest Expense Offset Related to Tax-Exempt Interest Income (rule 115)

Section 63-3022M, Idaho Code

01.In General. The interest expense offset provided by Section 63-3022M, Idaho Code, is a separate and distinct adjustment from provisions in the Internal Revenue Code that disallow interest expense related to federal tax-exempt interest.(4-6-23)

a.If a taxpayer owns an interest in a pass-through entity, that entity’s tax-exempt income is to also be included to the extent of the taxpayer’s interest.(4-6-23)

b.Interest income that is only partially exempt for federal purposes is not included. Also, expenses related to tax-exempt interest income such as adjustments provided by Sections 265 and 291, Internal Revenue Code, are not included.(4-6-23)

IDAPA 35.01.01.116 (Reserved)

IDAPA 35.01.01.120 Adjustments to Taxable Income -- Subtractions Available to All

TAXPAYERS (RULE 120).

Section 63-3022, Idaho Code. The following are allowable subtractions to all taxpayers in computing Idaho taxable inco

me.(4-6-23)

01.State and Local Income Tax Refunds. State and local income tax refunds included in taxable income may be subtracted, unless the refunds have already been subtracted pursuant to Section 63-3022(a), Idaho

02.Idaho Net Operating Loss. An S corporation or a partnership that incurs a loss is not entitled to claim a net operating loss deduction. The loss is passed through to the shareholders and partners who may deduct the loss.(4-6-23)

03.Income Not Taxable by Idaho. Income exempt from taxation by Idaho includes the following:

a.Interest income from obligations issued by the United States Government. Gain recognized from the sale of United States Government obligations is not exempt from Idaho tax and may not be subtracted from taxable income.(4-6-23)

b.Idaho lottery prizes exempt by Section 67-7439, Idaho Code. For prizes awarded on lottery tickets purchased in Idaho a subtraction is allowed for each lottery prize that is less than six hundred dollars ($600). If a prize equals or exceeds six hundred dollars ($600), no subtraction is allowed. The full amount of the prize is included in

c.Certain income from loss recoveries. See Section 63-3022R, Idaho Code.(4-6-23)

04.Special First-Year Depreciation Allowance. As provided by Section 63-3022O, Idaho Code, if a taxpayer claims the special first-year depreciation allowance on property acquired before 2008 or after 2009 pursuant to Section 168(k), Internal Revenue Code, the adjusted basis of that property and the depreciation deduction allowed for Idaho income tax purposes must be computed without regard to the special first-year depreciation allowance. The adjustments required by this subsection do not apply to property acquired after 2007 and before 2010.(4-6-23)

a.Depreciation. The amount of depreciation computed for Idaho income tax purposes that exceeds the amount of depreciation computed for federal income tax purposes may be subtracted.(4-6-23)

b.Gains and losses. During the recovery period, the adjusted basis of depreciable property computed for federal income tax purposes will be less than the adjusted basis for Idaho income tax purposes as a result of claiming the special first-year depreciation allowance. If a loss qualifies as a capital loss for federal income tax purposes, the federal capital loss limitations and carryback and carryover provisions apply in computing the Idaho capital loss allowed.(4-6-23)

i.If a sale or exchange of property results in a gain for both federal and Idaho income tax purposes, a subtraction is allowed for the difference between the federal and Idaho gains computed prior to any applicable Idaho capital gains deduction.(4-6-23)

ii.If a sale or exchange of property results in a gain for federal income tax purposes and an ordinary loss for Idaho income tax purposes, the federal gain and the Idaho loss must be added together and the total may be subtracted. For example, if a taxpayer has a federal gain of five thousand dollars ($5,000) and an Idaho loss of four thousand dollars ($4,000), the amount subtracted would be nine thousand dollars ($9,000).(4-6-23)

iii.If a sale or exchange of property results in an ordinary loss for both federal and Idaho income tax purposes, the difference between the federal and Idaho losses may be subtracted. For example, if a taxpayer has a federal loss of three hundred dollars ($300) and an Idaho loss of five hundred dollars ($500), the amount subtracted would be two hundred dollars ($200).(4-6-23)

iv.If a sale or exchange of property results in a capital loss for both federal and Idaho income tax purposes, apply the capital loss limitations and subtract the difference between the federal and Idaho deductible capital losses. For example, if a taxpayer has a federal capital loss of six thousand dollars ($6,000) and an Idaho capital loss of eight thousand dollars ($8,000), both the federal and Idaho capital losses are limited to a deductible capital loss of three thousand dollars ($3,000). In this case, no subtraction is required for the year of the sale. In the next year, assume the taxpayer had a capital gain for both federal and Idaho purposes of two thousand dollars ($2,000). The capital loss carryovers added to the capital gain results in a federal deductible capital loss of one thousand dollars ($1,000) and an Idaho deductible capital loss of three thousand dollars ($3,000). The taxpayer would subtract the difference between the federal and Idaho deductible losses or two thousand dollars ($2,000) in computing Idaho taxable income.(4-6-23)

IDAPA 35.01.01.121 Adjustments to Taxable Income -- Subtractions Available Only to

INDIVIDUALS (RULE 121).

Section 63-3022, Idaho Code Income Not Taxable by Idaho. As provided in Section 63-3022(f), Idaho Code, subtract the amount of income that is exempt from Idaho income tax if included in taxable income. Income exempt from taxation by Idaho includes the following:(4-6-23)

a.Certain income earned by American Indians.(4-6-23)

b.Retirement payments received pursuant to the old Teachers’ Retirement System. Prior to its repeal on July 1, 1967, the old Teachers’ Retirement System was codified at Title 33, Chapter 13, Idaho Code. Teachers who were employed by the state of Idaho and who retired on or after January 1, 1966, generally do not qualify for this exemption. Teachers who were not state employees and who retired on or after January 1, 1968, do not qualify.

Teachers receiving benefits pursuant to the Public Employees’ Retirement System, Title 59, Chapter 13, Idaho Code, do not qualify for the exemption. No exemption is provided for amounts received from other states, school districts outside Idaho, or any other source if the proceeds do not relate to teaching performed in Idaho.(4-6-23)

02.Standard or Itemized Deduction. If itemized deductions are limited pursuant to Section 68, Internal Revenue Code, the amount of state and local income or general sales taxes added back will be computed by dividing the amount of itemized deductions that are allowed to the taxpayer after all federal limitations by total itemized deductions before the Section 68 limitation.(4-6-23)

03.Unused Net Operating Losses of Estates and Trusts. An unused net operating loss carryover remaining on termination of an estate or trust is allowed to the beneficiaries succeeding to the property of the estate or trust. The carryover amount is the same in the hands of the beneficiaries as in the hands of the estate or trust. The first taxable year of the beneficiaries to which the net operating loss is to be carried is the taxable year of the beneficiary in which the estate or trust terminates. No part of a net operating loss incurred by an estate or trust can be carried back by a beneficiary, even if the estate or trust had no preceding taxable years eligible for a carryback. For purposes of determining the number of years to which a loss may be carried over by a beneficiary, the last taxable year of the estate or trust and the first taxable year of the beneficiary to which a loss is carried over each constitute a taxable year.

IDAPA 35.01.01.122 Adjustments to Taxable Income -- Subtractions Available Only to

CORPORATIONS (RULE 122).

Sections 63-3022 and 41-3821, Idaho Code Stock Insurance Subsidiary Dividends or Distributions.(4-6-23)

a.As provided in Section 41-3821, Idaho Code, a mutual insurance holding company or an intermediate holding company is to subtract the amount received as a dividend or distribution from a stock insurance subsidiary.(4-6-23)

b.The deduction allowed by Section 41-3821, Idaho Code, is not allowed if the stock insurance subsidiary’s Idaho premium tax liability for the preceding taxable year is less than the stock insurance subsidiary would have paid in Idaho income tax had it been subject to Idaho income taxation for that year. The Idaho premium tax liability is the amount of total premium taxes less total premium tax credits allowed. The Idaho income tax it would have paid is to be computed as provided by Section 63-3027, Idaho Code, net of any applicable income tax credits.(4-6-23)

c.The taxpayer claiming the deduction is to include in its Idaho income tax return for the year the deduction is claimed information that it is entitled to the deduction. Such information is to include the amount of the stock insurance subsidiary’s Idaho premium tax for the preceding taxable year and the amount of Idaho income tax it would have paid for such year.(4-6-23)

IDAPA 35.01.01.123 (Reserved)

IDAPA 35.01.01.125 Adjustments to Taxable Income -- Bonus Depreciation on Property

ACQUIRED AFTER SEPTEMBER 10, 2001, AND BEFORE DECEMBER 31, 2007, OR AFTER

DECEMBER 31, 2009 (RULE 125).

Section 63-3022O, Idaho Code In General. Section 63-3022O, Idaho Code, requires that when computing Idaho taxable income, the amount of the adjusted basis of depreciable property, depreciation, and gains and losses from the sale, exchange, or other disposition of depreciable property acquired after September 10, 2001, and before December 31, 2007, or acquired after December 31, 2009, must be computed without regard to bonus depreciation allowed by Section 168(k), Internal Revenue Code. To meet this requirement, a taxpayer must be consistent in making the Idaho adjustments required for all the taxable years in which federal bonus depreciation is claimed. The adjustments required by this rule do not apply to property acquired after 2007 and before 2010.(4-6-23)

02.Depreciation.(4-6-23)

a.If a taxpayer makes the Idaho addition in the first taxable year bonus depreciation was claimed for federal income tax purposes, in the subsequent taxable years the taxpayer is entitled to the Idaho subtractions for the additional depreciation computed for Idaho income tax purposes that exceeds the amount of depreciation claimed for federal income tax purposes.(4-6-23)

b.If a taxpayer fails to make the Idaho addition in the first taxable year bonus depreciation was claimed for federal income tax purposes, the taxpayer is not entitled to claim the Idaho subtractions for additional depreciation in subsequent taxable years. In such instances, claiming an Idaho subtraction for additional depreciation when the first year Idaho addition was not claimed constitutes computing depreciation with regard to Section 168(k), Internal Revenue Code, which is specifically prohibited in Section 63-3022O(1), Idaho Code. For example, the Idaho addition is required for a taxable year when the bonus depreciation is claimed even though the taxpayer may be limited in claiming a passive loss from a pass-through entity in which the bonus depreciation arose. If the bonus depreciation is not added back in that taxable year, the Idaho subtractions are not allowed in the subsequent taxable years.(4-6-23)

c.The Idaho adjustments are required in all taxable years in which the taxpayer has an Idaho filing requirement or is a member of a combined group of corporations in which at least one member has an Idaho filing requirement. If the taxpayer is not required to file an Idaho income tax return for one (1) or more years in which depreciation may be claimed, the taxpayer may claim the Idaho adjustment in the taxable years in which an Idaho return is filed if all such taxable years are treated consistently.(4-6-23)

d.Example. A corporation transacted business in California and Oregon during taxable year 2003. In 2004, the taxpayer began transacting business in Idaho and was required to file an Idaho corporation income tax return for that year. On the federal return filed for 2003, the taxpayer claimed bonus depreciation for assets placed in service that year. Because the taxpayer was not required to file an Idaho corporation income tax return for 2003, there was no Idaho bonus depreciation addition required of the taxpayer. In 2004, the second year of deprecation for the assets placed in service in 2003, the taxpayer was required for Idaho income tax purposes to compute depreciation on the assets as if bonus depreciation had not been claimed. The difference in the amount of Idaho depreciation and the depreciation claimed for federal income tax purposes for 2004 would be allowed to the taxpayer as an Idaho subtraction since the taxpayer was required to file an Idaho corporation income tax return for that year. Assuming the taxpayer files an Idaho corporation income tax return for the remaining years when depreciation on the assets is allowed, the taxpayer will be allowed the Idaho subtraction in those years for the difference in the Idaho and federal depreciation amounts. If the corporation transacted business in Idaho during 2003 only, the return filed for that year should reflect the Idaho addition for the difference in the amount of Idaho depreciation and the depreciation claimed for federal income tax purposes, even though the subtractions will not apply in subsequent years.(4-6-23)

IDAPA 35.01.01.126 (Reserved)

IDAPA 35.01.01.128 Idaho Adjustments -- Pass-Through Entities (rule 128)

01.In General.

An adjustment to a partnership, S corporation, estate or trust allowed or required by Idaho statute generally is claimed on the income tax returns of the partners, shareholders, or beneficiaries of the entity.(4-6-23)

a.Partnerships. An adjustment passes through to a partner based on that partner’s distributive share of partnership profits.(4-6-23)

b.S Corporations. An adjustment passes through to a shareholder based on that shareholder’s pro rata share of income or loss.(4-6-23)

c.Estates and Trusts. An adjustment passes through to a beneficiary in the same ratio that income is allocable to that beneficiary.(4-6-23)

02.Limitations. Deductions claimed on a partner’s, shareholder’s, or beneficiary’s tax return may not exceed the limitations imposed by statute or rule.(4-6-23)

03.Different Taxable Year Ends. If a pass-through entity has a taxable year end different from that of a partner, shareholder, or beneficiary, the adjustment is to be claimed in the same taxable year that income or loss from that entity is reported for federal income tax purposes.(4-6-23)

04.Information Provided by a Pass-Through Entity. The pass-through entity will prepare and distribute to each partner, shareholder, or beneficiary a schedule detailing the proportionate share of each adjustment.

Copies of these schedules is to be attached to the pass-through entity’s Idaho income tax return or information return for the taxable year that the adjustment is allowed or required.(4-6-23)

05.Pass-Through Entities That Pay Tax. Generally, a pass-through entity is to report the same Idaho adjustments as those allowed to the individual partner, shareholder, or beneficiary for whom the pass-through entity is paying the tax. However, certain deductions that may be allowed to the individual if reporting and paying the tax is not allowed to the pass-through entity.(4-6-23)

IDAPA 35.01.01.129 (Reserved)

IDAPA 35.01.01.130 Deduction of Certain Retirement Benefits (rule 130)

Section 63-3022A, Idaho Code Qualified Benefits. Subject to limitations, the following benefits qualify for the deduction:

a.Retirement annuities paid to a retired civil service employee. For purposes of this deduction a retired civil service employee is an individual who is receiving retirement annuities paid under the Civil Service Retirement System, the Foreign Service Retirement and Disability System, or the offset programs of these systems.

An individual is entitled to benefits from this retirement system only if he established eligibility prior to 1984.

Retirement annuities paid to a retired federal employee under the Federal Employees Retirement System generally do not qualify for the deduction. Retirement annuities received under the Federal Employees Retirement System by a retiree previously covered under the Civil Service Retirement System qualify to the extent the retiree establishes the portion of the annuity attributable to coverage under the Civil Service Retirement System.(4-6-23)

b.Retirement benefits paid as a result of participating in the firemen’s retirement fund of the state of Idaho as authorized by Title 72, Chapter 14, Idaho Code. A fireman is entitled to benefits from this fund only if he established eligibility as a paid fireman prior to October 1, 1980. Retirement benefits paid out of the public employee’s retirement system do not qualify for the deduction.(4-6-23)

c.Retirement benefits paid to a retired Idaho city police officer:(4-6-23)

i.By a city or its agent in regard to a policeman’s retirement fund that no longer admits new members and on January 1, 2012, was administered by a city in this state; or(4-6-23)

ii.In regard to a policeman’s retirement fund that no longer admits new members and on January 1, 2012, was administered by the public employee retirement system of Idaho; or(4-6-23)

iii.By the public employee retirement system of Idaho to a retired police officer in regard to Idaho employment not included in the federal social security retirement system; or(4-6-23)

iv. An unremarried widow or widower of a person described in Subparagraph 130.01.c.i., 130.01.c.ii., or 130.01.c.iii. of this rule.(4-6-23)

d.Retirement benefits paid by the United States Government to a retired member of the military services.(4-6-23)

02.Unremarried Widow or Widower. An unremarried widow or widower of a retired civil service employee, retired policeman, retired fireman, or retired member of the military services, who is sixty-five (65) or older, or sixty-two (62) and disabled, is eligible for the deduction, even though the deceased spouse was not eligible at the time of death. In this situation, the amount of the retirement benefits that can be considered for the deduction for the taxable year of the spouse’s death is limited to the benefits paid to the spouse as a widow or widower.

03.Married Individuals Filing Separate Returns. Married individuals who elect to file married filing separate are not entitled to the deduction allowed by Section 63-3022A, Idaho Code.(4-6-23)

IDAPA 35.01.01.131 (Reserved)

IDAPA 35.01.01.140 Deduction for Energy Efficiency Upgrades (rule 140)

Section 63-3022B, Idaho Code Sidin g is not considered an energy efficiency upgrade. If a layer of insulation is placed beneath siding, the cost of the insulation is deductible if it otherwise qualifies. If the siding consists of an outer shell for protection against the weather and an inner layer of insulating material, the insulating material qualifies if the cost is separately identified by the seller.(4-6-23)

IDAPA 35.01.01.141 (Reserved)

IDAPA 35.01.01.150 Deduction for Alternative Energy Devices (rule 150)

Section 63-3022C, Idaho Code Qualifying Residence. The deduction applies only to a residence of an individual and does not apply to rental housing, unless the renter, rather than the owner, installs and pays for the device.(4-6-23)

02.Converted Rental Unit. If a residence served by an alternative energy device is converted by the owner from a rental unit to his residence, the owner is entitled to any remaining allowable deduction for the year of the conversion based on the portion of the year that the residence served as his residence. For each subsequent year, the owner is entitled to the full amount of the allowable deduction for that year assuming the residence continues to be the owner’s residence.(4-6-23)

03.Destruction of Wood Burning Stove. The wood burning stove that does not meet the environmental protection agency requirements for certification is to be surrendered to the Department of Environmental Quality no later than thirty (30) days from the date of purchase of the qualifying alternative energy device. Failure to surrender the wood burning stove within the thirty (30) day period will result in the new device failing to qualify as an alternative energy device. The thirty (30) day period may be extended only if the taxpayer can show good cause for the delay.(4-6-23)

IDAPA 35.01.01.151 (Reserved)

IDAPA 35.01.01.170 Idaho Capital Gains Deduction -- in General (rule 170)

Losses From Nonqualified Property. Losses from property not qualifying for the Idaho capital gains deduction may not be netted against gains from property qualifying for the Idaho capital gains deduction before the amount of the deduction is determined.(4-6-23)

02.Losses From Qualified Property.(4-6-23)

a.Losses from property qualifying for the Idaho capital gains deduction are netted against gains from property qualifying for the Idaho capital gains deduction before the amount of the deduction is determined. (4-6-23)

b.A capital loss carryover from property qualifying for the Idaho capital gains deduction will be netted against current year gains from property qualifying for the Idaho capital gains deduction before the amount of the deduction is determined. If a taxpayer has a capital loss carryover consisting of qualified and nonqualified property, the qualified capital loss carryover is the proportion that the qualified capital loss bears to the total capital loss shown on the return in the prior year multiplied by the capital loss carryover.(4-6-23)

IDAPA 35.01.01.171 Idaho Capital Gains Deduction -- Qualified Property (rule 171)

01.Gain from Forfeited Rights and Payments. Gain attributable to a cancellation, lapse, expiration, or other termination of a contract right or obligation does not qualify for the Idaho capital gains deduction. This includes any gain from the lapse of an option or from forfeited earnest money, down payment, or similar payments, related to otherwise qualifying property.(4-6-23)

02.Timber. As used in Section 63-3022H(3)(e), Idaho Code, qualified timber grown in Idaho includes:(4-6-23)

a.Standing timber held as investment property that is a capital asset pursuant to Section 1221, Internal Revenue Code; and(4-6-23)

b.Cut timber if the taxpayer elects to treat the cutting of timber as a sale or exchange pursuant to Section 631(a), Internal Revenue Code.(4-6-23)

03.Nonqualifying Property. Nonqualifying property includes:(4-6-23)

a.Real or tangible personal property not having an Idaho situs.(4-6-23)

b.Tangible personal property not used by a revenue-producing enterprise.(4-6-23)

c.Intangible property. Some examples of intangible property include, but are not limited to: (4-6-23)

i.Stocks and bonds;(4-6-23)

ii.Interests in a partnership (except for interests identified in Section 63-3022H(3)(f)), Idaho Code, LLC, or S corporation.(4-6-23)

04.Holding Periods.(4-6-23)

a.In General. To qualify for the capital gains deduction, property otherwise eligible for the Idaho capital gains deduction must be held for specific time periods. The holding periods for Idaho purposes generally follow Sections 1223 and 735, Internal Revenue Code.(4-6-23)

b.Exception to the Tacked-On Holding Period. The holding period of property given up in a tax-free exchange is not tacked on to the holding period of the property received if the property given up was nonqualifying property based on the requirements of Section 63-3022H(3), Idaho Code.(4-6-23)

c.Installment Sales. The determination of whether the property meets the required holding period is made using the laws applicable for the year of the sale. If the required holding period is not met in the year of sale, the gain is not from qualified property. The classification as nonqualified property will not change even though the gain may be reported in subsequent years when a reduced holding period is applicable.(4-6-23)

05.Holding Periods of S Corporation and Partnership Property.(4-6-23)

a.Property Contributed by a Shareholder to an S Corporation or by a Partner to a Partnership. A shareholder or partner who contributes otherwise qualified property to an S corporation or partnership may treat the pass-through gain on the sale of that property as a qualifying Idaho capital gain if the property has, in total, been held by the shareholder or partner and the S corporation or partnership for the required holding period. The noncontributing shareholders or partners may treat the pass-through gain as a qualifying Idaho capital gain only if the S corporation or partnership held the property for the required holding period.(4-6-23)

b.Property Distributed by an S Corporation or Partnership.(4-6-23)

i.Distributions. For purposes of this rule, the holding period of property received in a distribution from a partnership or from an S corporation other than in liquidation of stock includes the time the entity held the property.(4-6-23)

IDAPA 35.01.01.172 Idaho Capital Gains Deduction -- Revenue-Producing Enterprise (rule 172)

01.Nonqualifying Activities. Examples of activities that do not qualify as a revenue-producing enterprise include the following:(4-6-23)

a.Retail sales;(4-6-23)

b.Professional or managerial services;(4-6-23)

c.Repair services or other service related activities; (4-6-23)

d.Transportation activities, unless they are an integral part of the taxpayer’s qualifying activity;

e.Telephone, cable, and internet services;(4-6-23)

f.Agricultural services, such as horse training, veterinarian services, and crop dusting.(4-6-23)

02.Multiple Activities. If a business is engaged in both revenue-producing and nonrevenue-producing activities, tangible personal property must be used in the revenue-producing activity to qualify for the Idaho capital gains deduction.(4-6-23)

IDAPA 35.01.01.173 Idaho Capital Gains Deduction -- P

ASS-THROUGH ENTITIES (RULE 173).

a.Qualified property held by an S corporation, partnership, trust, or estate may be eligible for the Idaho capital gains deduction. The deduction is allowed only on the return of an individual shareholder, individual partner, or individual beneficiary.(4-6-23)

b.Partnerships, S corporations, trusts, and estates that pay the tax for an electing individual pursuant to Section 63-3022L, Idaho Code, are not allowed to claim a capital gains deduction.(4-6-23)

02.Multistate Entities. A nonresident shareholder of an S corporation or a nonresident partner of a partnership required to allocate and apportion income as set forth in Section 63-3027, Idaho Code, is to compute his Idaho capital gains deduction on his interest in income of that portion of the qualifying capital gains allocated or apportioned to Idaho.(4-6-23)

a.An Idaho resident partner must report all partnership income to Idaho. As a result, his share of partnership income, including any capital gain included in apportionable income, is not limited by the apportionment factor of the partnership.(4-6-23)

b.Gains that cannot be traced back to the sale of Idaho qualifying property do not qualify for the Idaho capital gains deduction.(4-6-23)

IDAPA 35.01.01.174 (Reserved)

IDAPA 35.01.01.180 Deduction for Donation of Technological Equipment (rule 180)

Section 63-3022J, Idaho Code Fair Market Value. Fair market value is determined pursuant to Section 170, Internal Revenue

02.Pass-Through of Deduction.(4-6-23)

a.The deduction may not exceed the amount of pass-through income less deductions of the entity making the contribution.(4-6-23)

IDAPA 35.01.01.181 (Reserved)

IDAPA 35.01.01.185 Adoption Expenses (rule 185)

Section 63-3022I, Idaho Code

01.Ineligible Expenses.(4-6-23)

a.The costs associated with an unsuccessful attempt to adopt a child do not qualify for the deduction.

b.A deduction is not allowed for expenses incurred in violation of state or federal law or for a surrogate parenting arrangement.(4-6-23)

02.Financial Assistance. Eligible expenses are to be reduced by amounts received as financial aid for the adoption, or from a grant pursuant to a federal, state, or local program.(4-6-23)

IDAPA 35.01.01.186 (Reserved)

IDAPA 35.01.01.190 Idaho Medical Savings Accounts (rule 190)

Section 63-3022K, Idaho Code Health benefits paid with pretax contributions, such as those paid pursuant to a salary reduction agreement, are considered paid by the employer and do not qualify as an expense paid by the employee. Health benefits paid with after-tax dollars are considered paid by the employee and qualify as an expense paid by the employee. Examples available at Income Tax Rules Examples.(4-6-23)

IDAPA 35.01.01.191 (Reserved)

IDAPA 35.01.01.193 Health Insurance Costs and Long-Term Care Insurance (rule 193)

Sections 63-3022P and 63-3022Q, Idaho Code Costs Deducted or Accounted For. Deductions are not allowed for health insurance costs and premiums paid for long-term care insurance that are otherwise deducted or accounted for. Health insurance costs and premiums paid for long-term care insurance that are otherwise deducted or accounted for include amounts: (4-6-23)

a.Paid out of an Idaho medical savings account;(4-6-23)

b.Paid through a cafeteria plan or other salary-reduction arrangement when these costs are paid out of pretax income; or(4-6-23)

c.Deducted as business expenses.(4-6-23)

IDAPA 35.01.01.194 (Reserved)

IDAPA 35.01.01.195 Loss Recoveries (rule 195)

Section 63-3022R, Idaho Code No deduction is allowed for recovery of an amount not included in federal taxable income of the current year. No deduction is allowed to the extent the loss recovered previously reduced Idaho taxable income. Examples available at Income Tax Rules Examples.(4-6-23)

IDAPA 35.01.01.196 (Reserved)

IDAPA 35.01.01.200 Net Operating Loss -- Corporations (rule 200)

Section 63-3021, Idaho Code

01.Unitary Taxpayers. Each corporation included in a unitary group must determine its respective share of the Idaho apportioned net operating loss incurred by the unitary group for the taxable year. A corporation’s share of the net operating loss is computed using its Idaho apportionment factor for the year of the loss. The corporation must add or subtract its nonbusiness income or loss allocated to Idaho to its share of the apportioned loss.

02.Examples. Available at Income Tax Rules Examples.(4-6-23)

IDAPA 35.01.01.201 Net Operating Loss Carrybacks and Carryovers (rule 201)

Section 63-3022(c), Idaho Code Definitions for Purposes of Net Operating Loss Carrybacks and Carryovers.(4-6-23)

a.The term net operating loss deduction means the sum of the Idaho net operating losses carried to another taxable year and subtracted in computing Idaho taxable income.(4-6-23)

b.A net operating loss is absorbed when it has been fully subtracted from Idaho taxable income, as modified by Section 63-3021, Idaho Code.(4-6-23)

02.Adjustments to Net Operating Losses.(4-6-23)

a.Adjustments to a net operating loss will be determined pursuant to the law applicable to the loss

b.Adjustments to a net operating loss deduction may be made even though the loss year is closed due to the statute of limitations, but will not result in any tax due or refund for the closed taxable years.(4-6-23)

03.Adjustments in Carryback and Carryover Years.(4-6-23)

a.Adjustments to income, including modifications pursuant to Section 63-3021, Idaho Code, in a carryback or carryover year must be made for purposes of determining, how much, if any, of the net operating loss may be carried over to subsequent years.(4-6-23)

b.Adjustments are made pursuant to the law applicable to the carryback or carryover year.(4-6-23)

c.Adjustments may be made even though the year is closed due to the statute of limitations, but will not result in any tax due or refund for the closed taxable years.(4-6-23)

04.Net Operating Loss Carrybacks Application.(4-6-23)

a.The net operating loss carryback allowed for the entire carryback period may not exceed one hundred thousand dollars ($100,000) per taxpayer. Each corporation that has a net operating loss and is included in a unitary group is limited to a maximum carryback of one hundred thousand dollars ($100,000).(4-6-23)

b.The sum of net operating loss deductions must not exceed the amount of the net operating loss incurred.(4-6-23)

c.For taxable years beginning prior to January 1, 2013, if the taxpayer makes a valid election to forego the carryback period as provided in Subsection 201.05, the provisions of Subsection 201.04.c. do not apply and the net operating loss carryover is applied as follows:(4-6-23)

i.For net operating losses incurred in taxable years beginning on and after January 1, 2000, but prior to January 1, 2013, the net operating loss is subtracted in the twenty (20) succeeding taxable years, in order, until the loss is absorbed.(4-6-23)

d.For taxable years beginning prior to January 1, 2013, if the taxpayer fails to make a valid election to forego the carryback period, the net operating loss must be carried back. If a carryback year is closed due to the statute of limitations, the net operating loss carryback may not result in a refund for the closed taxable year. (4-6-23)

e.For net operating losses incurred in taxable years beginning on and after January 1, 2013, if an amended return carrying back the loss is filed within one (1) year of the end of the taxable year of the net operating loss, the net operating loss is applied to the second preceding taxable year and if not absorbed, the difference is applied to the first preceding taxable year. The loss not absorbed in the carryback years is subtracted in the twenty (20) succeeding taxable years, in order, until absorbed.(4-6-23)

05.Timing and Method of Electing to Forego Carryback For Taxable Years Beginning Before January 1, 2013.(4-6-23)

a.Net operating losses incurred in taxable years beginning on or after January 1, 2010. The election must be made by the due date of the loss year return, including extensions. Once the completed return is filed, the extension period expires. Unless otherwise provided in the Idaho return or in an Idaho form accompanying a return for the taxable year, the election referred to in this Subsection may be made by attaching a statement to the taxpayer’s income tax return for the taxable year of the loss. The statement must contain the following information:(4-6-23)

i.The name, address, and taxpayer’s social security number or employer identification number;

ii.A statement that the taxpayer makes the election pursuant to Section 63-3022(c)(1), Idaho Code, to forego the carryback provision; and(4-6-23)

iii.The amount of the net operating loss.(4-6-23)

b.Attaching a copy of the federal election to forego the federal net operating loss carryback to the Idaho income tax return for the taxable year of the loss does not constitute an election for Idaho purposes.(4-6-23)

c.If the election is made on an amended or original return filed subsequent to the time allowed in Paragraph 201.05.a, it is considered untimely.(4-6-23)

06.Order in Which Losses Are Applied in a Year. Loss carryovers are deducted before deducting any loss carrybacks applicable to the same taxable year.(4-6-23)

07.Documentation Required When Claiming a Net Operating Loss Deduction. A taxpayer claiming a net operating loss deduction for a taxable year must file with his return for that year a concise statement setting forth the amount of the net operating loss deduction claimed and all material and pertinent facts, including a detai led schedule showing the computation of the net operating loss and its carryback or carryover.(4-6-23)

08.Conversion of C Corporation to S Corporation. An S corporation may not carry over or back a net operating loss from a taxable year in which the corporation was a C corporation. However, an S corporation subject to Idaho tax on net recognized built-in gains or excess net passive income may deduct a net operating loss carryover from a taxable year in which the corporation was a C corporation against its net recognized built-in gain and excess net passive income.(4-6-23)

IDAPA 35.01.01.202 (Reserved)

IDAPA 35.01.01.210 Reduction of Idaho Tax Attributes and Basis When Income from

INDEBTEDNESS DISCHARGE IN BANKRUPTCY IS EXCLUDED FROM GROSS INCOME (RULE 210).

Section 63-3022(c), Idaho Code In General. Any taxpayer excluding from taxable income an amount resulting from the discharge of indebtedness in bankruptcy under Section 108(b) of the Internal Revenue Code, is to reduce Idaho net operating loss and basis in accordance with Section 346 of the Bankruptcy Code of the United States. If the discharge occurs outside of bankruptcy, the provisions of these rules do not apply.(4-6-23)

02.Order of Reduction. The reduction referred to in Subsection 210.01 is to be made to the following tax attributes in the following order:(4-6-23)

a.Any net operating loss deduction, as defined in Rule 201 of these rules, is to be reduced by the amount of the indebtedness forgiven or discharged in bankruptcy except as follows:(4-6-23)

i.A deduction with respect to the liability which is disallowed for any taxable period during or after the liability is forgiven or discharged. A deduction with respect to the liability includes a capital loss incurred on the disposition of a capital asset with respect to a liability that was incurred in connection with the acquisition of such asset.(4-6-23)

ii.To the extent that the indebtedness forgiven or discharged consisted of items of a deductible nature that were not deducted by the taxpayer, or resulted in an expired net operating loss deduction or carryover that did not offset income for any taxable period and did not contribute to a net operating loss in or a net operating loss carryover to the taxable period during or after the indebtedness was discharged.(4-6-23)

b.The basis in the taxpayer’s property or of property transferred to an entity required to use the taxpayer’s basis in whole or in part is to be reduced by the lesser of:(4-6-23)

i.The amount of the forgiven or discharged indebtedness, minus the total amount of adjustments made under Subsection 210.02.a.; and(4-6-23)

ii.The amount of the debtor’s total basis of assets before the discharge that exceeds the total preexisting liabilities still remaining after discharge of indebtedness. Basis may not be reduced below a level equal to the remaining undischarged liabilities.(4-6-23)

03.Exception to Basis Reduction. The basis reduction under Subsection 210.02.b. is not required if the taxpayer elects to treat the amount that would otherwise be applied in reduction of basis as taxable income of the taxable period in which the debt is forgiven or discharged.(4-6-23)

04.Discharge Not Treated as Discharged Indebtedness. The following provisions exclude from this rule indebtedness that is discharged and treat the debtor as if it had originally issued stock instead of debt. No reduction to the Idaho net operating loss or basis is required if one (1) or more of these provisions are satisfied.

a.The indebtedness did not consist of items of a deductible nature and is exchanged for an equity security, other than a limited partnership interest, issued by the debtor or is forgiven as a contribution to capital; or

b.The indebtedness consisted of items of a deductible nature, and the exchange of stock for debt has the same effect as a cash payment equal to the fair market value of the equity security that is issued by the debtor or, if the value of the security is less than the value of the debt, only part of the debt will be excluded.(4-6-23)

IDAPA 35.01.01.211 (Reserved)

IDAPA 35.01.01.250 Nonresident and Part-Year Resident Individuals -- Income Subject to

IDAHO TAXATION (RULE 250).

Sections 63-3026A(1) and (2), Idaho Code

01.Receipt of Income -- Part-Year Residents. For purposes of determining if income is reportable to Idaho by a part-year resident, a cash basis taxpayer is considered to have earned or received income when it is actually or constructively received, except as provided in Subsections 250.04 and 250.05.(4-6-23)

02.Receipt of Intangible Income -- Part-Year Residents.(4-6-23)

a.Interest and dividend income received from a source other than from a pass-through entity is considered to be earned or received by a part-year resident ratably during the taxable year.(4-6-23)

b.If a transaction or activity gives rise to income that is reported in a subsequent year when the taxpayer is a part-year resident, the income must be treated as received ratably during that subsequent year.

Subsection 250.04 also applies to income that is not received during the year by the taxpayer, but which must be reported in taxable income.(4-6-23)

c.A part-year resident must report such income to Idaho in the proportion that the number of days during the taxable year that the individual qualified as an Idaho part-year resident bears to total days in the taxable

03.Receipt of Pass-Through Items of Income and Losses -- Part-Year Residents.(4-6-23)

a.For a part-year resident who is a shareholder in an S corporation, or a partner in a partnership, the income, gains, losses and other pass-through items from the S corporation or partnership are treated as received ratably during the taxpayer’s taxable year. If the taxpayer was not a shareholder or partner for the entire taxable year, the pass-through items are treated as received ratably during the portion of the taxable year the taxpayer was a shareholder of the S corporation or partner of the partnership.(4-6-23)

b.For a part-year resident who is a beneficiary of an estate or trust, the income, gains, losses and other pass-through items from the estate or trust are treated as received ratably during the taxpayer’s taxable year. If the taxpayer was not a beneficiary of the estate or trust for the entire taxable year, the pass-through items are treated as received ratably during the portion of the taxable year the taxpayer was a beneficiary of the estate or trust.(4-6-23)

c.A part-year resident must report such income to Idaho in the proportion that the number of days during the taxable year that the individual qualified as an Idaho part-year resident bears to total days in the taxable

IDAPA 35.01.01.251 Nonresident and Part-Year Resident Individuals -- Computation of Idaho

TAXABLE INCOME (RULE 251).

Section 63-3026A, Idaho Code F or purposes of this rule, federal total income means gross income less certain deductions allowed under the Internal Revenue Code. It is the amount reported on the federal individual income tax return that is identified as total income.

IDAPA 35.01.01.252 Nonresident and Part-Year Resident Individuals -- Adjustments Allowed

IN COM

PUTING IDAHO ADJUSTED GROSS INCOME (RULE 252).

In General. Deductions allowed in computing adjusted gross income will be allowed in computing Idaho adjusted gross income unless specifically denied by Idaho law. The amount allowed will be computed as provided in this rule. Each computation in this rule will include the amounts reported for the taxable year unless otherwise indicated.(4-6-23)

02.Deductions Directly Related to Specific Items of Income or Property. If the deduction directly relates to a specific item of income or property, the allowable deduction will be computed by dividing the amount of related income reported in Idaho income by the total of such related income reported in federal income. This percentage is multiplied by the deduction to arrive at the amount allowed as an Idaho deduction. If the deduction is related to property that did not generate income during the taxable year, the deduction will be allowed in the proportion that the property to which the deduction relates was located in Idaho. Examples of some of these deductions include the following:(4-6-23)

a.Penalty on early withdrawal of savings. The allowable deduction will be computed by dividing the interest income of the time savings deposit subject to the penalty included in Idaho income by the total interest income of the time savings deposit included in federal income. This percentage is multiplied by the penalty deduction allowed for federal purposes.(4-6-23)

b.Certain business expenses of reservists, performing artists, and fee-basis government officials.

c.Jury duty pay remitted to an employer.(4-6-23)

d.Deductible expenses related to income from the rental of personal property engaged in for profit.

e.Reforestation amortization and expenses. The allowable deduction will be computed by dividing the income from the related timber operations included in Idaho income by the total income from the related timber operations. If there is no income from the related timber operations for the year of the deduction, the allowable deduction will be computed based on the percentage of property in Idaho to total property to which the reforestation amortization and expenses relate. This percentage is multiplied by the reforestation amortization and expense deduction allowed for federal income tax purposes.(4-6-23)

f.Repayment of supplemental unemployment benefits. The allowable deduction will be computed by dividing the supplemental unemployment benefits included in Idaho income by the total supplemental unemployment benefits reported in federal income. This percentage is multiplied by the repayment deduction allowed for federal purposes.(4-6-23)

g.Attorney fees and court costs. The allowable deduction will be computed by dividing the total income related to the attorney fees and court costs included in Idaho income by the total income from such actions.

This percentage is multiplied by the attorney fees and court costs allowed for federal purposes.(4-6-23)

03.Deductions Allowed Based on Qualifying Types of Income. If the deduction is dependent on the taxpayer earning a qualifying type of income, the allowable deduction will be computed by dividing the amount of the qualifying income reported in Idaho income by the total of such qualifying income reported. This percentage is multiplied by the deduction to arrive at the amount allowed as an Idaho deduction.(4-6-23)

a.Payments to an individual retirement account (IRA), federal health savings or medical savings account, or Section 501(c)(18)(D) retirement plan. The allowable deduction will be computed by dividing the taxpayer's Idaho compensation by the taxpayer's total compensation. This percentage is multiplied by the deduction allowed for federal purposes. For purposes of this rule, compensation means “compensation” as defined in Section 219(f)(1), Internal Revenue Code, and Treasury Regulation Section 1.219-1(c)(1). Idaho compensation is determined pursuant to Rule 270 of these rules.(4-6-23)

b.Payments to a Keogh retirement plan, simplified employee pension (SEP) Plan, SIMPLE Plan, selfemployment tax, and self-employment health insurance. The allowable deduction will be computed by dividing the taxpayer's self-employment income from Idaho sources by the taxpayer's total self-employment income. This percen tage is multiplied by the self-employment deductions allowed for federal purposes.(4-6-23)

04.Other Deductions. Deductions that do not relate to specific items of income or to the earning of qualifying income will be allowed in the proportion that Idaho total income bears to federal total income. The federal net operating loss deduction is not included in either the federal total income or the Idaho total income for this calculation. Such deductions include the following:(4-6-23)

a.Alimony payments.(4-6-23)

b.Moving expenses.(4-6-23)

c.Student loan interest payments.(4-6-23)

d.Tuition and fees deduction.(4-6-23)

IDAPA 35.01.01.253 Nonresident and Part-Year Resident Individuals -- Additions Required in

COMPUTING IDAHO ADJUSTED INCOME.

Section 63-3026A(6), Idaho Code. The following must be added to Idaho adjusted gross income in computing the Idaho adjus ted income of nonresident and part-year resident individuals.(4-6-23)

01.Interest and Dividends Not Taxable Pursuant to the Internal Revenue Code.(4-6-23)

a.Part-Year Residents. Interest and dividend income not taxable pursuant to the Internal Revenue Code that was received while residing in or domiciled in Idaho must be added. However, interest received from obligations of the state of Idaho or any political subdivision of Idaho is exempt from Idaho income tax and is not added.(4-6-23)

b.Nonresidents. Interest and dividend income reportable from a pass-through entity that was transacting business in Idaho must be added to the extent the income was apportioned or allocated as Idaho income.

02.Net Operating Loss Deduction. The amount of the net operating loss deduction included in Idaho adjusted gross income must be added.(4-6-23)

03.Capital Loss. Capital losses included in Idaho adjusted gross income must be added if the loss was incurred while not residing in and not domiciled in Idaho, or if the loss relates to an activity not taxable by Idaho at the time the loss was incurred.(4-6-23)

04.Lump Sum Distributions. Part-year residents must add the taxable amount of a lump sum distribution deducted in calculating taxable income received while residing in or domiciled in Idaho. This includes both the ordinary income portion and the amount eligible for the capital gain election.(4-6-23)

05.Idaho Medical Savings Account. An account holder must add the amount of any nonqualified withdrawal from an Idaho medical savings account if the withdrawal was not made for the purpose of paying eligible medical expenses.(4-6-23)

06.Idaho College Savings Program.(4-6-23)

a.An account owner must add the amount of a nonqualified withdrawal from an Idaho college savings program, less the amount included in the account owner’s Idaho adjusted gross income. The addition is limited to contributions previously exempt from Idaho state income tax and earnings generated from the program as long as the earnings are not already included in federal adjusted gross income. Nonqualified withdrawal is defined in Section 33-5401, Idaho Code.(4-6-23)

b.As provided in Section 63-3022(p), Idaho Code, an account owner must add the amount of a withdrawal from an Idaho college savings program that is transferred on or after July 1, 2007, to a qualified tuition program operated by a state other than Idaho. For taxable years beginning on or after January 1, 2008, the addback is limited to the total of the amounts contributed to the Idaho college savings program that were deducted on the account owner’s Idaho income tax returns for the year of the transfer and the immediately preceding taxable year.(4-6-23)

07.Special First-Year Depreciation Allowance. As provided by Section 63-3022O, Idaho Code, if a taxpayer claims the special first-year depreciation allowance on property acquired before 2008 or after 2009 pursuant to Section 168(k), Internal Revenue Code, the adjusted basis of that property and the depreciation deduction allowed for Idaho income tax purposes must be computed without regard to the special first-year depreciation allowance. An individual must add the amount of depreciation computed for federal income tax purposes that exceeds the amount of depreciation computed for Idaho income tax purposes. This addition does not apply to depreciation computed on property acquired after 2007 and before 2010.(4-6-23)

IDAPA 35.01.01.254 Nonresident and Part-Year Resident Individuals -- Subtractions Allowed

IN COMPUTING IDAHO ADJUSTED INCOME (RULE 254).

Section 63-3026A(6), Idaho Code. The following are allowable subtractions in computing the Idaho adjusted income of nonresident and part-year resident individuals.(4-6-23)

01.Idaho Net Operating Loss. An Idaho net operating loss deduction described in Section 63-3021, Idaho Code, and allowed by Section 63-3022(c), Idaho Code, may be subtracted to the extent the loss was incurred while the taxpayer was residing in or domiciled in Idaho or to the extent the loss was from activity taking place in Idaho. A net operating loss incurred from an activity not taxable by Idaho may not be subtracted.(4-6-23)

02.State and Local Income Tax Refunds. State and local income tax refunds included in Idaho total income may be subtracted unless the refunds have already been subtracted pursuant to Section 63-3022(a), Idaho

03.Income Not Taxable by Idaho. As provided in Section 63-3022(f), Idaho Code, income that is exempt from Idaho income taxation by a law of the state of Idaho or of the United States may be subtracted if that income is included in Idaho total income and has not been previously subtracted. Income exempt from taxation by Idaho includes the following:(4-6-23)

a.Interest income from obligations issued by the United States Government. Gain recognized from the sale of United States Government obligations is not exempt from Idaho tax and, therefore, may not be subtracted from taxable income.(4-6-23)

b.Idaho lottery prizes exempt by Section 67-7439, Idaho Code. For prizes awarded on lottery tickets purchased in Idaho a subtraction is allowed for each lottery prize that is less than six hundred dollars ($600). If a prize equals or exceeds six hundred dollars ($600), no subtraction is allowed. The full amount of the prize is included in

c.Certain income earned by American Indians. An enrolled member of a federally recognized Indian tribe who lives on his tribe’s federally recognized Indian reservation is not taxable on income derived within that reservation.(4-6-23)

d.Certain income earned by transportation employees covered by Title 49, Sections 11502, 14503 or 40116, United States Code.(4-6-23)

e.Certain income from loss recoveries. See Section 63-3022R, Idaho Code.(4-6-23)

04.Military Pay. Qualified military pay included in Idaho total income earned for military service performed outside Idaho may be subtracted. Qualified military pay means all compensation paid by the United States for services performed while on active duty as a full-time member of the United States Armed Forces which full-time duty is or will be continuous and uninterrupted for one hundred twenty (120) consecutive days or more. A nonresident does not include his military pay in Idaho total income and, therefore, makes no adjustment.(4-6-23)

05.Social Security and Railroad Retirement Benefits. Social security benefits and benefits paid by the Railroad Retirement Board that are taxable pursuant to the Internal Revenue Code may be subtracted to the extent the benefits are included in Idaho total income.(4-6-23)

06.Household and Dependent Care Expenses. The allowable portion of household and dependent care expenses that meets the requirements of Section 63-3022D, Idaho Code, may be subtracted if incurred to enable the taxpayer to be gainfully employed in Idaho. To determine the allowable portion of household and dependent care expenses, a percentage is calculated by dividing Idaho earned income by total earned income. The qualified expenses are multiplied by the percentage. Earned income is defined in Section 32(c)(2), Internal Revenue Code.(4-6-23)

07.Insulation and Alternative Energy Device Expenses. Expenses related to the installation of insulation or alternative energy devices that meet the requirements of Section 63-3022B or 63-3022C, Idaho Code, may be subtracted.(4-6-23)

08.Deduction for Dependents Sixty-Five or Older or with Developmental Disabilities. One thousand dollars ($1,000) may be subtracted for each person who meets the requirements of Section 63-3022E, Idaho Code. The deduction may be claimed for no more than three (3) qualifying dependents. If a dependent has not lived in the maintained household for the entire taxable year, the allowable deduction is eighty-three dollars ($83) for each month the dependent resided in the maintained household during the taxable year. For purposes of this rule, a fraction of a month exceeding fifteen (15) days is treated as a full month.(4-6-23)

09.Adoption Expenses. The allowable portion of adoption expenses that meets the requirements of Section 63-3022I, Idaho Code, may be subtracted. To determine the allowable portion, calculate a percentage by dividing Idaho total income by total income. The deduction allowable pursuant to Section 63-3022I, Idaho Code, is multiplied by the percentage.(4-6-23)

10.Capital Gains Deduction. The Idaho capital gains deduction allowed by Section 63-3022H, Idaho Code, may be subtracted.(4-6-23)

11.Idaho Medical Savings Account.(4-6-23)

a.The qualifying amount of contributions to an Idaho medical savings account that meets the requirements of Section 63-3022K, Idaho Code, may be subtracted.(4-6-23)

b.Interest earned on an Idaho medical savings account may be subtracted to the extent included in Idaho total income.(4-6-23)

12.Technological Equipment Donation. As provided by Section 63-3022J, Idaho Code, the lower of cost or fair market value of technological equipment donated to qualifying institutions may be subtracted, limited to the Idaho taxable income of the taxpayer.(4-6-23)

13.Worker’s Compensation Insurance. As allowed by Section 63-3022(m), Idaho Code, a selfemployed individual may subtract the premiums paid for worker’s compensation for coverage in Idaho to the extent not previously subtracted in computing Idaho taxable income.(4-6-23)

14.Idaho College Savings Program. The qualifying amount of contributions to a college savings program that meets the requirements of Section 63-3022(n), Idaho Code, may be subtracted.(4-6-23)

15.Retirement Benefits. As provided in Section 63-3022A, Idaho Code, a deduction from taxable income is allowed for certain retirement benefits. To determine the allowable portion of the deduction for certain retirement benefits, a percentage is calculated by dividing the qualified retirement benefits included in Idaho gross income by the qualified retirement benefits included in federal gross income. The deduction allowable pursuant to Section 63-3022A, Idaho Code, is multiplied by the percentage.(4-6-23)

16.Health Insurance Costs. The allowable portion of the amounts paid by the taxpayer during the taxable year for insurance that constitutes medical care as defined in Section 63-3022P, Idaho Code, for the taxpayer, spouse or dependents of the taxpayer not otherwise deducted or accounted for by the taxpayer for Idaho income tax purposes may be subtracted. To determine the allowable portion of the amounts paid for medical care insurance, a percentage is calculated by dividing Idaho total income by total income. The deduction allowable pursuant to Section 63-302 2P, Idaho Code, is multiplied by the percentage.(4-6-23)

17.Long-Term Care Insurance. As provided in Section 63-3022Q, Idaho Code, a deduction from taxable income is allowed for the allowable portion of premiums paid during the taxable year for qualifying longterm care insurance for the benefit of the taxpayer, a dependent of the taxpayer or an employee of the taxpayer that have not otherwise been deducted or accounted for by the taxpayer for Idaho income tax purposes. To determine the allowable portion, a percentage is calculated by dividing Idaho total income by total income. The deduction allowable pursuant to Section 63-3022Q, Idaho Code, is multiplied by the percentage.(4-6-23)

18.Special First-Year Depreciation Allowance. As provided by Section 63-3022O, Idaho Code, if a taxpayer claims the special first-year depreciation allowance on property acquired before 2008 or after 2009 pursuant to Section 168(k), Internal Revenue Code, the adjusted basis of that property and the depreciation deduction allowed for Idaho income tax purposes must be computed without regard to the special first-year depreciation allowance. The adjustments required by this subsection do not apply to property acquired after 2007 and before 2010.(4-6-23)

a.Depreciation. The amount of depreciation computed for Idaho income tax purposes that exceeds the amount of depreciation computed for federal income tax purposes may be subtracted.(4-6-23)

b.Gains and losses. During the recovery period, the adjusted basis of depreciable property computed for federal income tax purposes will be less than the adjusted basis for Idaho income tax purposes as a result of claiming the special first-year depreciation allowance. If a loss qualifies as a capital loss for federal income tax purposes, the federal capital loss limitations and carryback and carryover provisions apply in computing the Idaho capital loss allowed.(4-6-23)

i.If a sale or exchange of property results in a gain for both federal and Idaho income tax purposes, a subtraction is allowed for the difference between the federal and Idaho gains computed prior to any applicable Idaho capital gains deduction.(4-6-23)

ii.If a sale or exchange of property results in a gain for federal income tax purposes and an ordinary loss for Idaho income tax purposes, the federal gain and the Idaho loss must be added together and the total may be subtracted. For example, if a taxpayer has a federal gain of five thousand dollars ($5,000) and an Idaho loss of four thousand dollars ($4,000), the amount subtracted would be nine thousand dollars ($9,000).(4-6-23)

iii.If a sale or exchange of property results in an ordinary loss for both federal and Idaho income tax purposes, the difference between the federal and Idaho losses may be subtracted. For example, if a taxpayer has a federal loss of three hundred dollars ($300) and an Idaho loss of five hundred dollars ($500), the amount subtracted would be two hundred dollars ($200).(4-6-23)

iv.If a sale or exchange of property results in a capital loss for both federal and Idaho income tax purposes, apply the capital loss limitations and subtract the difference between the federal and Idaho deductible capital losses. For example, if a taxpayer has a federal capital loss of six thousand dollars ($6,000) and an Idaho capital loss of eight thousand dollars ($8,000), both the federal and Idaho capital losses are limited to a deductible capital loss of three thousand dollars ($3,000). In this case, no subtraction is required for the year of the sale. In the next year, assume the taxpayer had a capital gain for both federal and Idaho purposes of two thousand dollars ($2,000). The capital loss carryovers added to the capital gain results in a federal deductible capital loss of one thousand dollars ($1,000) and an Idaho deductible capital loss of three thousand dollars ($3,000). The taxpayer would subtract the difference between the federal and Idaho deductible losses or two thousand dollars ($2,000) in computing Idaho taxable income.(4-6-23)

IDAPA 35.01.01.255 Nonresident and Part-Year Resident Individuals -- Proration of

EXEMPTIONS AND DEDUCTIONS (RULE 255).

Section 63-3026A(4), Idaho Code In General. The exemptions and deductions allowable for federal purposes, except for the deduction of state and local income taxes and the deduction for state and local general sales taxes, are allowed in part in computing Idaho taxable income. To determine the portion of exemptions and deductions allowable for part-year and nonresident individuals, the total exemptions and deductions allowed by Section 151, Internal Revenue Code, and Section 63-3022(j), Idaho Code, are multiplied by the calculated proration.(4-6-23)

02.Proration. For taxable years beginning in or after 2007, the proration is calculated by dividing Idaho adjusted income by total adjusted income. Calculate four (4) digits to the right of the decimal point. If the fifth digit is five (5) or greater, the fourth digit is rounded to the next higher number ($10,000 / $15,000 = .66666 = .6667 = 66.67%). If the fifth digit is less than five (5), the fourth digit remains unchanged and any digits remaining to its right are dropped ($10/000 / $30,000 = .33333 = .3333 = 33.33%). The percentage may not exceed one hundred percent (100%), nor be less than zero (0).(4-6-23)

a.Idaho adjusted income means the Idaho taxable income of the taxpayer as computed pursuant to Title 63, Chapter 30, Idaho Code, except for any adjustments for the standard deduction or itemized deductions and personal exemptions. Total adjusted income means the Idaho taxable income of the taxpayer computed as if he were a resident of Idaho for the entire taxable year, except no adjustments are made for the standard deduction, itemized deductions, personal exemptions, the deduction for active military service pay as provided in Section 63-3022(h), Idaho Code, and any deduction for income earned within a federally recognized Indian reservation.(4-6-23)

b.Generally, both Idaho adjusted income and total adjusted income are positive amounts. If Idaho adjusted income is less than or equal to the total adjusted income, the percentage is between zero (0) and one hundred percent (100%). If Idaho adjusted income is greater than the total adjusted income, the percentage is one hundred percent (100%). If Idaho adjusted income is a positive amount and total adjusted income is a negative amount, the percentage is one hundred percent (100%). If Idaho adjusted income is a negative amount and total adjusted income is a positive amount, the percentage is zero (0).(4-6-23)

03.Standard Deduction for Married Filing Joint Returns. The proration percentage is applied after making the following calculations for taxable years beginning on or after January 1, 2000. The standard deduction allowed on a married filing joint return is equal to two (2) times the basic standard deduction for a single individual.

Add to this amount any additional standard deduction for the aged or blind allowed for federal income tax purposes.

IDAPA 35.01.01.256 Nonresident and Part-Year Resident Individuals -- Proration of Qualified

BUSINESS INCOME DEDUCTION (RULE 256).

In General. The qualified business income deduction allowable for federal purposes is allowed in part in computing Idaho taxable income. To determine the portion of qualified business income deduction allowable for part-year and nonresident individuals, the qualified business income deduction allowed by Section 199A, Internal Revenue Code, is multiplied by the calculated proration.(4-6-23)

02.Proration. For taxable years beginning in or after 2018, the proration is calculated by dividing the total Idaho source qualified business income (loss) by the total qualified business income (loss). Calculate four (4) digits to the right of the decimal point. If the fifth digit is five (5) or greater, the fourth digit is rounded to the next higher number ($10,000 / $15,000 = .66666 = .6667 = 66.67%). If the fifth digit is less than five (5), the fourth digit remains unchanged and any digits remaining to its right are dropped ($10,000 / $30,000 = .33333 = .3333 = 33.33%).

The percentage may not exceed one hundred percent (100%), nor be less than zero (0).(4-6-23)

a.Idaho source qualified business income or (loss) means the taxpayer's Idaho apportioned share of the qualified business income or (loss) from each qualified trade or business.(4-6-23)

b.If the net Idaho source qualified business income is zero or less, no qualified business income deduction is allowed for Idaho income tax purposes.(4-6-23)

IDAPA 35.01.01.257 (Reserved)

IDAPA 35.01.01.263 Idaho Source Income of Nonresident and Part-Year Resident Individuals --

DISTRIBUTIVE SHARE OF S CORPORATION AND PARTNERSHIP INCOME (RULE 263).

In General. The taxable amount of a shareholder’s pro rata share or a partner’s distributive share of business income, gains, losses, and other pass-through items from an S corporation or partnership operating both within and without Idaho is determined by multiplying each pass-through item by the Idaho apportionment factor of the business. The Idaho apportionment factor is determined pursuant to Section 63-3027, Idaho Code, and related

02.Nonbusiness Income. Pass-through items of identifiable nonbusiness income, gains, or losses of an S corporation or partnership constitute Idaho source income to the shareholder or partner if allocable to Idaho pursuant to the principles set forth in Section 63-3027, Idaho Code.(4-6-23)

03.Pass-Through Items. Whether a pass-through item of income or loss is business or nonbusiness income is determined at the pass-through entity level. Pass-through items of business income or loss may include:

a.Ordinary income or loss from trade or business activities;(4-6-23)

b.Net income or loss from rental real estate activities;(4-6-23)

c.Net income or loss from other rental activities;(4-6-23)

d.Interest income;(4-6-23)

e.Dividends;(4-6-23)

f.Royalties;(4-6-23)

g.Capital gain or loss;(4-6-23)

h.Other portfolio income or loss;(4-6-23)

i.Gain or loss recognized pursuant to Section 1231, Internal Revenue Code.(4-6-23)

4. Guaranteed Payments Treated As Compensation.(4-6-23)

a.Guaranteed payments to an individual partner up to the amount shown at https://tax.idaho.gov/ guarpay in any calendar year is sourced as compensation for services. If a nonresident partner performs services on behalf of the partnership within and without Idaho, the amount included in Idaho compensation is determined as provided in Rule 270 of these rules.(4-6-23)

b.The amounts of guaranteed payments that are sourced as compensation for services are listed at https://tax.idaho.gov/guarpay.(4-6-23)

05.Distributions.(4-6-23)

a.Partnerships. The amount of distributions received by a partner that is from Idaho sources is determined by multiplying the taxable amount of distributions pursuant to Section 731, Internal Revenue Code, by the Idaho apportionment factor of the partnership.(4-6-23)

b.S Corporations. The amount of distributions received by a shareholder that is from Idaho sources is determined by multiplying the taxable amount of distributions pursuant to Section 1368, Internal Revenue Code, by the Idaho apportionment factor of the S corporation.(4-6-23)

IDAPA 35.01.01.264 Income from Real and Tangible Personal Property (rule 264)

01.In General. Rents, royalties, profits, gains, losses and other items of income from the ownership or disposition of real or tangible personal property located in Idaho is Idaho source income.(4-6-23)

02.Property Located Within and Without Idaho.(4-6-23)

a.If the property is located or used within and without Idaho, specific allocation of the income, gain, or loss is appropriate if the gross receipts and related deductions and expenses are readily identifiable from the location or use of the property in Idaho.(4-6-23)

b.To the extent income derived from real property located both within and without Idaho cannot be specifically allocated, the rents, profits, gains, losses or other items of income that constitute Idaho source income are determined by multiplying each item of income by a fraction. The numerator of the fraction is the average value of the property located in Idaho and the denominator is the average value of the property located both within and without Idaho. The value of real property is determined by the original cost of the land and improvements. The average value is determined by averaging the values at the beginning and end of the taxable year. However, the Tax Commission may require the averaging of monthly values during the taxable year if required to properly reflect the average value of the taxpayer’s property.(4-6-23)

c.To the extent income derived from tangible personal property used both within and without Idaho cannot be readily allocated, the rents, royalties, gains, losses, and other items of income that constitute Idaho source income are determined by multiplying each item of income by a fraction. The numerator of the fraction is the total number of days the property was used in Idaho during the taxable year, and the denominator is the total number of days the property was used both within and without Idaho during the taxable year.(4-6-23)

03.Alternative Method. If either fraction in Subsection 264.02 does not fairly represent the income derived from the property’s use in Idaho, the taxpayer may propose or the Tax Commission may require an alternative method. For example, acres may be a more appropriate measure than average value in some cases.(4-6-23)

a.The taxpayer will fully explain the alternative method in a statement attached to his Idaho

b.The method proposed by the taxpayer may be used in lieu of the method in Subsection 264.02 unless the Tax Commission expressly denies its use.(4-6-23)

IDAPA 35.01.01.265 Sole Proprietorships Operating Within and Without Idaho (rule 265)

In General. A sole proprietorship that operates within and without Idaho will apply the principles of allocation and apportionment of income set forth in Section 63-3027, Idaho Code, and related rules to determine the extent of proprietorship income that is derived from or related to Idaho sources. The use of a combined report, however, is available only to C corporations.(4-6-23)

02.Application of Rule. This rule also applies to farming activities operated as a sole proprietorship.

03.Alternative Method. If the method described in Subsection 265.01 does not fairly represent the extent of the business activity in Idaho, the taxpayer may propose or the Tax Commission may require an alternative method.(4-6-23)

a.The taxpayer will fully explain the alternative method in a statement attached to his Idaho

b.The method proposed by the taxpayer may be used in lieu of the method in Subsection 265.01 unless the Tax Commission expressly denies its use.(4-6-23)

IDAPA 35.01.01.266 Idaho Source Income of Nonresident and Part-Year Resident Individuals --

INCOME FROM

INTANGIBLE PROPERTY (RULE 266).

In General. Gross income from intangible property generally is sourced to the state of the owner’s domicile. The following are exceptions to this rule.(4-6-23)

a.If the intangible property is employed in the owner’s trade, business or profession carried on within Idaho, any income derived from or related to the property, including gains from the sale thereof, constitutes income from Idaho sources. For example, if a nonresident pledges stocks, bonds or other intangible personal property as security for the payment of indebtedness incurred in connection with the nonresident’s Idaho business operations, the intangible property has an Idaho situs and the income derived therefrom constitutes Idaho source income.(4-6-23)

b.Interest income from the sale of real or tangible personal property on the installment method is treated as income from the sale of the underlying property and is therefore sourced to Idaho if the underlying property was located in Idaho when sold.(4-6-23)

c.Interest income paid by an S corporation to a shareholder or by a partnership to a partner is sourced to Idaho in proportion to the Idaho apportionment factor of the partnership or S corporation.(4-6-23)

d.Gains or losses from the sale or other disposition of a partnership interest or stock in an S corporation are sourced to Idaho by using the Idaho apportionment factor for the entity for the taxable year immediately preceding the year of the sale of the interest or stock. However, a gain or loss from the sale of an interest in a publicly traded partnership transacting business in Idaho is Idaho source income to the extent of the gain or loss determined under Section 751, Internal Revenue Code, multiplied by the Idaho apportionment factor of the partnership for the year in which the sale occurred.(4-6-23)

02.Interest Income Earned on a Bank Account.(4-6-23)

a.Personal Bank Accounts. Interest income earned on a personal bank account is sourced to the owner’s state of domicile. A personal bank account is an account that is not used in connection with a business.

b.Business Bank Accounts. If the business is a sole proprietorship, see Rule 265 of these rules. If the business is an S corporation or partnership, see Rule 263 of these rules.(4-6-23)

03.Payment of Penalties. Payment of penalties is sourced to Idaho the same as interest income. This includes penalties arising from the prepayment or late payment of an installment contract. If the installment contract is for the sale of Idaho property, any penalty paid is Idaho source income.(4-6-23)

04.Covenant Not to Compete. Income from a covenant not to compete is sourced to Idaho based on the Idaho apportionment factor of the entity sold for the taxable year immediately preceding the year of the sale.

05.Goodwill. Gain or loss from the sale of goodwill from a business transacting business in Idaho is sourced to Idaho based on the Idaho apportionment factor of the business sold for the taxable year immediately preceding the year of the sale.(4-6-23)

06.Timing of Sourcing Determination for Intangible Personal Property. The source of gains and losses from the sale or other disposition of intangible personal property is determined at the time of the sale or disposition of the property. For example, if an Idaho resident sells intangible personal property under the installment method, and subsequently becomes a nonresident, gain attributable to any installment payment receipts relating to that sale will be sourced to Idaho even though the individual is a nonresident when a payment is received. If the intangible personal property was employed in the owner’s business, trade, profession, or occupation conducted or carried on in Idaho as described in Paragraph 266.01.a., of this rule, at the time of the sale, any subsequent installment payments is Idaho source income.(4-6-23)

IDAPA 35.01.01.267 Idaho Source Income of Nonresident and Part-Year Resident Individuals --

PASSIVE ACTIVITY LOSSES (RULE 267).

In General. Losses from a passive activity incurred while an individual is a nonresident are included in Idaho taxable income only to the extent the losses were from Idaho activity.(4-6-23)

02.Idaho Activity. An activity is an Idaho activity only to the extent the income from that activity would be included in the Idaho taxable income of a nonresident pursuant to Section 63-3026A, Idaho Code. If a passive activity is engaged in both within and without Idaho, the principles of allocation and apportionment of income set forth in Section 63-3027, Idaho Code, and related rules must be applied to determine the extent of Idaho activity.(4-6-23)

03.Prior Year Losses. Suspended passive activity losses from prior years included in federal taxable income for the current year are included in Idaho taxable income only to the extent the losses were from Idaho activity.(4-6-23)

04.Current Year Losses. Non-Idaho passive activity losses incurred in the current taxable year are included in Idaho taxable income only to the extent the losses were incurred while the individual was an Idaho resident. The portion of the losses incurred while an Idaho resident is determined by prorating the losses based on the proportion of the year the individual resided in Idaho.(4-6-23)

IDAPA 35.01.01.268 Idaho Source Income of Nonresident and Part-Year Resident Individuals --

SUSPENDED LOSSES FROM PASS-THROUGH ENTITIES (RULE 268).

Section 63-3026A, Idaho Code In General. A nonresident individual’s suspended losses from a pass-through entity are included in Idaho taxable income in the year included in federal taxable income only to the extent the losses were from an Idaho source in the year incurred.(4-6-23)

a.Suspended Loss. For purposes of this rule, a suspended loss is a loss required to be carried over to a succeeding taxable year due to Section 465(a), Section 704(d), or Section 1366(d) of the Internal Revenue Code.

b.Idaho Source. A suspended loss is from an Idaho source in the year incurred to the extent provided by Section 63-3026A, Idaho Code, and related rules. For purposes of this rule, the Idaho source portion of a suspended business loss subject to apportionment is determined by multiplying the loss by the Idaho apportionment factor of the pass-through entity in the year the loss was incurred. The Idaho apportionment factor is determined pursuant to Section 63-3027, Idaho Code, and related rules.(4-6-23)

c.Nonbusiness Losses. A suspended nonbusiness loss is from an Idaho source in the year incurred to the extent the loss is allocable to Idaho pursuant to Section 63-3027, Idaho Code and Rule 263.02 of these rules.

d.Year Loss Incurred. For purposes of this rule, “year incurred” means the tax year the loss was first suspended.(4-6-23)

02.Losses from Multiple Years. For purposes of this rule, losses from a pass-through entity are considered used in the order incurred.(4-6-23)

IDAPA 35.01.01.269 (Reserved)

IDAPA 35.01.01.270 Idaho Source Income of Nonresident and Part-Year Resident Individuals --

IDAHO COMPENSATION -- IN GENERAL (RULE 270).

In General. If a nonresident individual performs personal services, either as an employee, agent, independent contractor, partner, or otherwise, both within and without Idaho, the portion of his total compensation that constitutes Idaho source income is determined by multiplying that total compensation by the Idaho compensation percentage.(4-6-23)

02.Definitions.(4-6-23)

a.The Idaho compensation percentage is the percentage computed by dividing Idaho workdays by total workdays.(4-6-23)

b.The term Idaho workdays means the total number of days the taxpayer provided personal services in Idaho for a particular employer or principal during the calendar year. If personal services were provided both within and without Idaho on the same day, that day is an Idaho workday unless the taxpayer establishes that less than fifty percent (50%) of the services were performed within Idaho that day. If an employee works in Idaho part of the day on a regular full-time basis, working hours must be used to determine the amount of Idaho compensation.

c.Total workdays means the total number of days the taxpayer provided personal services for that employer or principal both within and without Idaho during the calendar year. For example, a taxpayer working a five (5) day work week may assume total workdays of two hundred sixty (260) less any vacation, holidays, sick leave days and other days off.(4-6-23)

d.Total compensation means all salary, wages, commissions, contract payments, and other compensation for services, including sick leave pay, holiday pay and vacation pay, that is taxable pursuant to the Internal Revenue Code.(4-6-23)

03.WorkDays. Workdays include only those days the taxpayer actually performs personal services for the benefit of the employer or principal. Vacation days, sick leave days, holidays, and other days off from work are considered non-workdays whether compensated or not. Total workdays must equal Idaho workdays plus non-Idaho workdays. The taxpayer has the burden of establishing non-Idaho workdays. Documentation establishing non-Idaho workdays may be required to support the Idaho compensation percentage used by the taxpayer.(4-6-23)

04.Multiple Employers. If a taxpayer performs personal services both within and without Idaho for more than one (1) employer or principal, he must determine an Idaho compensation percentage separately for each employer or principal.(4-6-23)

05.Alternative Method. If the Idaho compensation percentage does not fairly represent the extent of the taxpayer's personal service activities in Idaho, the taxpayer may propose or the Tax Commission may require an alternative method. For example, working hours may be a more appropriate measure than workdays in some cases.

a.The taxpayer must fully explain the alternative method in a statement attached to his Idaho

b.The alternative method may be used in lieu of the method in Subsection 270.01 unless the Tax Commission expressly denies its use.(4-6-23)

IDAPA 35.01.01.271 Idaho Compensation: Stock Options (rule 271)

In General. The granting of stock options is considered to be compensation for services. Although considered as compensation, in some circumstances the taxpayer may report the compensation on his federal income tax return as capital gain income. The character of the income from the granting of stock options and the timing of reporting it for federal income tax purposes apply in computing Idaho taxable income.(4-6-23)

02.Definitions. For purposes of this rule:(4-6-23)

a.Workdays, Idaho workdays, and total workdays are defined in Rule 270 of these rules.(4-6-23)

b.Compensable period means the period that begins at the date the stock option is granted and ends at the earlier of the date the stock option becomes vested or the date the employee’s services terminate.(4-6-23)

c.Statutory stock options are options governed by specific Internal Revenue Code sections that impose restrictions on both the employer and the employee. Statutory stock options include incentive stock options as provided in Section 422, Internal Revenue Code, and options issued pursuant to employee stock purchase plans as provided in Section 423, Internal Revenue Code.(4-6-23)

d.Nonstatutory stock options are options that do not meet the Internal Revenue Code requirements to qualify as statutory stock options or are granted pursuant to a plan or offering that does not qualify.(4-6-23)

03.Compensation for Future Services. The granting of stock options will be presumed to be intended as compensation for future services. The party alleging otherwise bears the burden of proving that the stock options were intended for services rendered before the date of grant.(4-6-23)

04.Statutory Stock Options.(4-6-23)

a.Compensation. Compensation is realized at the date the option is exercised, but not taxable until the income or gain is recognized for federal income tax purposes. If a taxpayer reports a capital gain for federal income tax purposes from statutory stock options, the amount of Idaho source compensation will also be reported as capital gain income for Idaho income tax purposes. Idaho source compensation is determined as follows:(4-6-23)

i.Compensation is equal to the portion of the gain that equals the difference between the option price and the fair market value of the stock at the date the option was exercised. Compensation is limited to the gain actually recognized if the stock is sold for less than its fair market value at the time the option was exercised. No compensation will be reported if the stock is sold at a loss.(4-6-23)

ii.Compensation for services performed in Idaho equals the compensation determined in Subsection 271.04.a.i., multiplied by the ratio of Idaho workdays to total workdays during the compensable period.(4-6-23)

b.Investment Income. Appreciation in the value of the stock after the date the option was exercised is to be reported as investment income and sourced to the taxpayer’s domicile at the date the stock was sold.(4-6-23)

05.Nonstatutory Stock Options.(4-6-23)

a.Compensation. Compensation is recognized at the date the stock option is exercised. The amount of Idaho source compensation related to the stock option is determined as follows:(4-6-23)

i.Compensation for federal income tax purposes is equal to the difference between the option price and the fair market value of the stock at the date the option was exercised.(4-6-23)

ii.Compensation for services performed in Idaho equals the compensation determined in Subsection 271.05.a.i., multiplied by the ratio of Idaho workdays to total workdays during the compensable period.(4-6-23)

b.Investment Income. Appreciation or depreciation in the value of the stock after the date the option was exercised is to be reported as investment income and sourced to the taxpayer’s domicile at the date the stock was sold.(4-6-23)

IDAPA 35.01.01.272 Idaho Compensation: Severance Pay (rule 272)

In General. In accordance with federal Treasury Regulation Section 1.61-2, termination or severance pay is treated as compensation for services. The amount of termination or severance pay received by a nonresident that is subject to Idaho income tax is determined pursuant to this rule.(4-6-23)

02.Definitions. For purposes of this rule workdays, Idaho workdays and total workdays are defined in Rule 270 of these rules.(4-6-23)

03.Calculation of Idaho Source Severance Pay. The amount of severance pay that is Idaho source income is to be equal to the severance pay received during the taxable year multiplied by the ratio of Idaho workdays to total workdays during either of the following:(4-6-23)

a.The employee's entire period of employment with such employer; or(4-6-23)

b.The employee's last twelve (12) months of employment with such employer.(4-6-23)

04.Alternative Method. If the Idaho compensation percentage computed in Subsection 272.03 does not fairly represent the extent of the taxpayer's personal service activities in Idaho, the taxpayer may propose or the Tax Commission may require an alternative method. For example, working hours may be a more appropriate measure than workdays in some cases.(4-6-23)

a.The taxpayer will fully explain the alternative method in a statement attached to his Idaho

b.The alternative method may be used in lieu of the method in Subsection 272.03 unless the Tax Commission expressly denies its use.(4-6-23)

IDAPA 35.01.01.273 Idaho Compensation: Unemployment Compensation (rule 273)

Section 63-3026A(3), Idaho Code. Unemployment compensation b enefits are Idaho source income if the benefits are received by the taxpayer from the state of Idaho, even though the benefits may relate to wages earned in Idaho and another state. Unemployment compensation benefits received from another state does not constitute Idaho source income even though the calculation of the benefits may be based in part on wages earned in Idaho.(4-6-23)

IDAPA 35.01.01.274 (Reserved)

IDAPA 35.01.01.275 Idaho Source Income of Nonresident and Part-Year Resident Individuals --

INVESTMENT INCOME FROM QUALIFIED INVESTMENT PARTNERSHIPS (RULE 275).

Section 63-3026A(3)(c), Idaho Code

a.For taxable years beginning on or after January 1, 2007, the Idaho taxable income of a nonresident individual does not include the distributive share of investment income of a qualified investment partnership. The distributive share of noninvestment income of a qualified investment partnership derived from or related to sources within Idaho is included in Idaho taxable income. See Rule 250 of these rules for information on when pass-through income from a partnership is deemed to have been received.(4-6-23)

b.The exemption from tax on investment income from a qualified investment partnership does not apply to gains or losses derived from the sale of a nonresident individual’s interest in a qualified investment partnership. The source of these gains and losses is governed by Section 63-3026A(3)(a)(vii), Idaho Code, and Rule 266 of these rules. The source of investment income that is not from a qualified investment partnership is determined as provided in Rule 263 of these rules.(4-6-23)

02.Qualified Investment Partnership. An entity is a qualified investment partnership only if it meets both of the following criteria:(4-6-23)

a.The entity is classified as a partnership for federal income tax purposes, but is not a publicly traded partnership taxed as a corporation under Section 63-3006, Idaho Code.(4-6-23)

b.The gross income from investments of the entity is derived at least ninety percent (90%) from investments that when held by a nonresident individual directly, would not produce income subject to the Idaho income tax.(4-6-23)

03.Investment Income. For purposes of this exclusion, an item of partnership income is investment income only if it would not be Idaho taxable income of a nonresident individual if the individual held the investment directly.(4-6-23)

IDAPA 35.01.01.276 (Reserved)

IDAPA 35.01.01.280 Partnerships Operating Within and Without Idaho (rule 280)

Sections 63-3026A(3), 63-3027 and 63-3030(a)(9), Idaho Code

01.In General. A partnership that operates within and without Idaho must apply the principles of allocation and apportionment of income set forth in Section 63-3027, Idaho Code, and related rules to determine the extent of partnership income that is derived from or related to Idaho sources. The use of a combined report, however, is available only to C corporations.(4-6-23)

02.Exceptions to Apportionment Formula. If the method described in Subsection 280.01 does not fairly represent the extent of the business activity in Idaho, the partnership may file a request to use, or the Tax Commission may require, an alternative method, including the following:(4-6-23)

a.Separate accounting as provided in Rule 585 of these rules;(4-6-23)

b.The exclusion of a factor pursuant to Rule 590 of these rules;(4-6-23)

c.An additional factor or substitute factor pursuant to Rule 595 of these rules; or(4-6-23)

d.The employment of any other method that would fairly represent the extent of business activity in

03.Information Provided to Partners. The partnership must provide to each partner information necessary for the partner to compute his Idaho income tax. Such information must include:(4-6-23)

a.The partner’s share of each pass-through item of income and deduction;(4-6-23)

b.The partner’s share of each Idaho addition and subtraction;(4-6-23)

c.The partner’s share of Idaho qualifying contributions, Idaho tax credits, and tax credit recapture;

d.The partner’s share of income allocated to Idaho;(4-6-23)

e.The partnership’s apportionment factor, and if the partner is not an individual, the partnership’s property, payroll and sales factor numerator and denominator amounts, including the amount of capitalized rent expense; and(4-6-23)

f.The partner’s distributive share of partnership gross income if the partner is an individual, trust, or estate.(4-6-23)

IDAPA 35.01.01.281 (Reserved)

IDAPA 35.01.01.285 S Corporations (rule 285)

Sections 63-3025 and 63-3025A, Idaho Code Minimum Tax. The minimum tax is required of every S corporation that is required to file a return.

A name-holder or inactive S corporation that is authorized to do business in Idaho pays the minimum tax of twenty dollars ($20) even though the S corporation did not conduct Idaho business activity during the taxable year. (4-6-23)

02.Nonproductive Mining Corporations. A nonproductive mining corporation is a corporation that does not own any producing mines and does not engage in any business other than mining. An S corporation that qualifies as a nonproductive mining corporation is required to file and pay tax if it receives any other income.

03.Application of Credits. If an S corporation was previously a C corporation with an Idaho income tax credit carryover at the time of the S corporation election, the S corporation may use any available credit carryover against the tax on the excess net passive income or net recognized built-in gains if the carryover period related to the Idaho income tax credit has not expired before the taxable year in which the tax must be reported.(4-6-23)

04.Tax Resulting From the Requirements of Section 63-3022L, Idaho Code. An S corporation is subject to tax at the corporate rate on the income required to be reported for qualifying shareholders under Section 63- 3022L, Idaho Code. This tax is in addition to any tax the S corporation owes under Section 63-3025 or 63-3025A,

05.Qualified Subchapter S Subsidiary. A corporation that is a qualified subchapter S subsidiary (QSSS) will be treated for Idaho income tax purposes the same as treated for federal income tax purposes. The QSSS will not be treated as a separate corporation, but all the assets, liabilities, and items of income, deduction, and credit of a QSSS will be treated as assets, liabilities and such items of the S corporation. Since the QSSS is not treated as a separate taxpayer, it is not subject to the minimum tax.(4-6-23)

IDAPA 35.01.01.286 S Corporations Operating Within and Without Idaho (rule 286)

Sections 63-3027 and 63-3030(a)(4), Idaho Code In General. An S corporation that operates within and without Idaho must apply the principles of allocation and apportionment of income set forth in Section 63-3027, Idaho Code, and related rules to determine the extent of S corporation income that is derived from or related to Idaho sources. The use of a combined report, however, is available only to C corporations.(4-6-23)

02.Information Provided to Shareholders. An S corporation must provide to each shareholder information necessary for the shareholder to compute his Idaho income tax. Such information must include: (4-6-23)

a.The shareholder’s share of each pass-through item of income and deduction;(4-6-23)

b.The shareholder’s share of each Idaho addition and subtraction;(4-6-23)

c.The shareholder’s share of Idaho qualifying contributions, Idaho tax credits, and tax credit recapture;(4-6-23)

d.The shareholder’s share of income allocated to Idaho;(4-6-23)

e.The S corporation’s apportionment factor; and(4-6-23)

f.The shareholder’s distributive share of S corporation gross income.(4-6-23)

03.Protection Under Public Law 86-272. An S corporation whose Idaho business activities fall under the protection of Public Law 86-272 is exempt from the taxes imposed by Sections 63-3025 and 63-3025A, Idaho Code, including the minimum tax.(4-6-23)

04.Qualified Subchapter S Subsidiary. A corporation that is a qualified subchapter S subsidiary (QSSS) must include its apportionment attributes with its parent’s apportionment attributes to compute one Idaho apportionment factor for the S corporation. If the S corporation and its qualified subchapter S subsidiaries are carrying on more than one unitary business, each unitary business must allocate and apportion its income pursuant to Rule 340.03.(4-6-23)

IDAPA 35.01.01.287 (Reserved)

IDAPA 35.01.01.291 Tax Paid by Pass-Through Entities for Owners or Beneficiaries --

COMPUTATION OF IDAHO TAXABLE INCOME FOR TAXABLE YEARS BEGINNING ON OR AFTER

JANUARY 1, 2014 (RULE 291).

Sections 63-3022L and 63-3026A, Idaho Code Income Reportable to Idaho. The following items must be included in the computation of Idaho taxable income for an individual:(4-6-23)

a.Pass-through items that are income from Idaho sources of an owner as determined pursuant to Rule 263 of these rules.(4-6-23)

b.Distributable net income from an estate or trust that is income from Idaho sources.(4-6-23)

02.Deductions. Pass-through entities paying the tax under Section 63-3022L, Idaho Code, are not entitled to claim the following deductions on behalf of an individual.(4-6-23)

a.Capital Loss. As provided in Section 63-3022(i), Idaho Code, S corporations and partnerships are not allowed to carry over or carry back any capital loss provided for in Section 1212, Internal Revenue Code.

b.Net Operating Loss. As provided in Section 63-3022(i), Idaho Code, S corporations and partnerships are not allowed to carry over or carry back any net operating loss provided for in Section 63-3022(c),

c.Idaho Capital Gains Deduction. As provided in Section 63-3022H, Idaho Code, the Idaho capital gains deduction may only be claimed by individual taxpayers on an individual income tax return.(4-6-23)

d.Informational Items. Amounts provided to owners of pass-through entities and beneficiaries of trusts and estates on the federal Schedule K-1 that are informational only may not be used as a deduction in computing the taxable income reportable under Section 63-3022L, Idaho Code. Informational items include the domestic production activities information and net earnings from self-employment.(4-6-23)

e.Items Not Deductible Under the Internal Revenue Code. A deduction is not allowed for items disallowed under the Internal Revenue Code. For example, a deduction is not allowed for items disallowed as a deduction in Sections 162(c) and 262 through 280E, Internal Revenue Code, unless specifically allowed by Idaho law. Items allowed by Idaho law include expenses related to tax-exempt income under Section 265, Internal Revenue Code, which are allowed to be deducted as a result of Section 63-3022M, Idaho Code.(4-6-23)

f.Items Not Reported as a Pass-Through Deduction. Amounts not reported from the pass-through entity to the pass-through owner are not allowed as a deduction under Section 63-3022L, Idaho Code. These include:

i.The standard deduction;(4-6-23)

ii.Personal exemptions;(4-6-23)

iii.Itemized deductions that result from activity of the pass-through owner. For example, a deduction is not allowed for charitable contributions made personally by the pass-through owner, but is allowed for the passthrough owner’s share of charitable contributions made by the pass-through entity.(4-6-23)

g.Items Reported as a Pass-Through Deduction. Amounts reported from the pass-through entity to the pass-through owner in their distributive share are allowed as a deduction under Section 63-3022L, Idaho Code, unless otherwise disallowed under this rule. These include but are not limited to:(4-6-23)

i.Section 179, Internal Revenue Code, deduction;(4-6-23)

ii.Charitable contributions made by the pass-through entity;(4-6-23)

iii.Investment interest expense;(4-6-23)

iv.Section 59(e)(2), Internal Revenue Code, expenditures (qualified research expenditures); (4-6-23)

v.Amounts paid for medical insurance;(4-6-23)

vi.Educational assistance benefits;(4-6-23)

vii.Payments to a pension or IRA.(4-6-23)

03.Double Deductions Disallowed. A pass-through owner may not deduct amounts that previously have been deducted by a pass-through entity paying the tax on his behalf. If the pass-through owner files an Idaho individual income tax return reporting federal taxable income that includes amounts previously deducted by a passthrough entity on his behalf, the pass-through owner must add back the duplicated deduction amounts in computing his Idaho taxable income on his individual income tax return. (4-6-23)

IDAPA 35.01.01.292 (Reserved)

IDAPA 35.01.01.300 Tax on Corporations (rule 300)

Sections 63-3025 and 63-3025A, Idaho Code Excise Tax. A corporation excluded from the tax on corporate income imposed by Section 63- 3025, Idaho Code, is subject to the excise tax imposed by Section 63-3025A, Idaho Code. If a corporation is subject to the excise tax imposed by Section 63-3025A, Idaho Code, it is not subject to the tax on corporate income imposed by Section 63-3025, Idaho Code.(4-6-23)

02.Minimum Tax. A name-holder or inactive corporation that is authorized to do business in Idaho pays the minimum tax of twenty dollars ($20) even though the corporation did not conduct Idaho business activity during the taxable year. A nonproductive mining corporation generally is not required to pay the minimum tax.

03.Nonproductive Mining Corporations. A nonproductive mining corporation is a corporation that does not own any producing mines and does not engage in any business other than mining. A corporation that qualifies as a nonproductive mining corporation is required to file and pay tax if it receives any other income.

04.Protection Under Public Law 86-272. A corporation whose Idaho business activities fall under the protection of Public Law 86-272 is exempt from the taxes imposed by Sections 63-3025 and 63-3025A, Idaho Code, including the minimum tax.(4-6-23)

05.Corporate Income Tax Rates. Corporate tax rates are listed at https://tax.idaho.gov/busit.

IDAPA 35.01.01.301 (Reserved)

IDAPA 35.01.01.310 Apportionment Elections for Multistate Corporations (rule 310)

Available Options. A multistate corporation transacting business in Idaho may elect to be taxed pursuant to the provisions of the Idaho Income Tax Act or pursuant to the Multistate Tax Compact, Section 63-3701, Idaho Code. This provides three (3) options:(4-6-23)

a.Apportionment and allocation pursuant to Section 63-3027, Idaho Code.(4-6-23)

b.Apportionment and allocation pursuant to Article III, Section 1 of the Multistate Tax Compact.

However, if this option is elected, in any case in which the provisions of Article III, Section 1 of the Multistate Tax Compact are inconsistent with the provisions of Section 63-3027, Idaho Code, the provisions of Section 63-3027, Idaho Code, shall control. Because of Subsection 63-3027(3), Idaho Code, this option is indistinguishable from the standard apportionment option identified above in Subsection 01.a. of this rule.(4-6-23)

c.Tax based on one percent (1%) of sales pursuant to Article III, Section 2 of the Multistate Tax Compact and Section 63-3702, Idaho Code. This option is available to corporations whose only activity in Idaho consists of sales that are not in excess of one hundred thousand dollars ($100,000) during the taxable year. (4-6-23)

02.Three-Factor Apportionment Election for Certain Taxpayers. The default apportionment factor for taxpayers under Section 63-3027, Idaho Code, is sales factor only. However, multistate taxpayers subject to Section 63-3027(23), Idaho Code, are an exception to the default provision of apportioning income and are subject separate accounting where required. Pursuant to Section 63-3027(10)(b), Idaho Code, an electrical corporation, a telephone corporation, a communications company, or a taxpayer subject to a special industry regulation pursuant to Rule 580 may elect to apportion all apportionable income of the taxpayer to Idaho 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).(4-6-23)

03.Electing an Option. A multistate corporation is to file pursuant to Section 63-3027, Idaho Code, unless it elects to report and pay income tax pursuant to one (1) of the options specified in Subsections 310.01.b., 310.01.c., or 310.02. The election must be made on the return by checking the applicable box if provided, otherwise, by attaching a written statement of the election to the return. After the election has been made, the election may not be changed for a taxable year thereafter without permission of the Tax Commission. A petition to change the election must include an explanation of the legal or factual basis for requesting the change and a computation of the taxpayer’s Idaho taxable income and tax liability computed using both the prior reporting method and the method the taxpayer is petitioning to use for the year of change. The written petition requesting the change of apportionment method must be filed with the Tax Commission at least thirty (30) days prior to the due date for filing the tax return.(4-6-23)

04.Election for Members of a Combined Group. The elections identified in this Rule apply at the entity level, not to the entire combined group. For example, if an entity in a combined group is one (1) of the types of corporations allowed to make the three-factor election, and choses to do so, but the other entities in the group are not the types of corporations allowed to make the three-factor election, these other entities will still use single sales factor. If mixing entities using different apportionment methods within a combined group produces apportionment results that do not fairly represent the business activity in Idaho of any of the taxpayers, then, pursuant to Section 63- 3027(17), Idaho Code, the taxpayer may petition for or the Tax Commission may require, a reasonable alternative apportionment. A written statement must be attached to the combined return specifying which entities have or are electing to use three-factor apportionment.(4-6-23)

IDAPA 35.01.01.311 (Reserved)

IDAPA 35.01.01.320 Application of Multistate Rules (rule 320)

Prologue. Rules 320 through 699 of these rules are intended to set forth the application of the apportionment and allocation provisions of Section 63-3027, Idaho Code. The only exceptions to these allocation and apportionment rules are those set forth in these rules pursuant to the authority of Sections 63-3027(18) and 63- 3027(23), Idaho Code.(4-6-23)

02.Taxpayers Conducting Business Within and Without Idaho. Section 63-3027, Idaho Code, and related rules apply to corporations conducting business within and without Idaho, and to other taxpayers if required by other provisions of the Idaho Code or of these rules. However, only C corporations may use the combined report to determine Idaho taxable income. See Rule 360 of these rules.(4-6-23)

IDAPA 35.01.01.321 (Reserved)

IDAPA 35.01.01.325 Definitions for Purposes of Multistate Rules (rule 325)

Section 63-3027, Idaho Code. For purposes of computing the Idaho taxable income of a multistate corporation, the following definitions apply:(4-6-23)

01.Affiliated Corporation and Affiliated Group. An affiliated corporation is a corporation that is a member of a commonly controlled group of which the taxpayer is also a member. The commonly controlled group is referred to as an affiliated group. Although Idaho generally follows federal tax principles and terminology, Idaho’s use of the terms affiliated corporation and affiliated group means a corporation or corporations with over fifty percent (50%) of its voting stock directly or indirectly owned or controlled by a common owner or owners. For information on what constitutes common control, see Rule 344 of these rules.(4-6-23)

02.Allocation. Allocation refers to the assignment of nonapportionable income to a particular state.

03.Apportionment. Apportionment refers to the division of apportionable income between states in which the business is conducted by the use of a formula containing apportionment factors.(4-6-23)

04.Business Activity. Business activity refers to the transactions and activity occurring in the regular course of a particular trade or business of a taxpayer or to the acquisition, management, and disposition of property that constitute integral parts of the taxpayer’s regular trade or business operations.(4-6-23)

05.Combined Group. Combined group means the group of corporations that comprise a unitary business and are includable in a combined report pursuant to Section 63-3027(22) or 63-3027B, Idaho Code, if the water’s edge election is made.(4-6-23)

06.Combined Report. Combined report refers to the computational filing method to be used by a unitary business which is conducted by a group of corporations wherever incorporated rather than a single corporation.(4-6-23)

07.Gross Receipts.(4-6-23)

a.Gross receipts are the gross amounts realized, (the sum of money and the fair market value of other property or services received) on the sale or exchange of property, the performance of services, or the use of property or capital (including rents, royalties, interest and dividends) in a transaction that produces apportionable income, in which the income or loss is recognized (or would be recognized if the transaction were in the United States) under the Internal Revenue Code. Amounts realized on the sale or exchange of property are not reduced for the cost of goods sold or the basis of property sold. Gross receipts, even if apportionable income, do not include such items as, for example:(4-6-23)

i.Repayment, maturity, or redemption of the principal of a loan, bond, or mutual fund or certificate of deposit or similar marketable instrument;(4-6-23)

ii.The principal amount received under a repurchase agreement or other transaction properly characterized as a loan;(4-6-23)

iii.Proceeds from issuance of the taxpayer's own stock or from sale of treasury stock;(4-6-23)

iv.Damages and other amounts received as the result of litigation;(4-6-23)

v.Property acquired by an agent on behalf of another;(4-6-23)

vi.Tax refunds and other tax benefit recoveries;(4-6-23)

vii.Pension reversions;(4-6-23) viii.Contributions to capital;(4-6-23)

ix.Income from forgiveness of indebtedness; or(4-6-23)

x.Amounts realized from exchanges of inventory that are not recognized by the Internal Revenue

b.Exclusion of an item from the definition of gross receipts is not determinative of its character as apportionable or nonapportionable income. Nothing in this definition is to be construed to modify, impair or supersede any provision of Rules 560 through 595 of these rules.(4-6-23)

08.Group Return. A unitary group of corporations may file one (1) Idaho corporate income tax return fo r all the corporations of the unitary group that are required to file an Idaho income tax return. When used in these rules, group return refers to this sole return filed by a unitary group. Use of the group return precludes the need for each corporation to file its own Idaho corporate income tax return.(4-6-23)

09.MTC. The Multistate Tax Commission.(4-6-23)

10.Multistate Corporation. A multistate corporation is a corporation that operates in more than one (1) state. For purposes of this definition, state is defined in Section 63-3027(1)(j), Idaho Code.(4-6-23)

11.Unitary Business. Unitary business is a concept of constitutional law defined in decisions of the United States Supreme Court. See Rule 340 of these rules.(4-6-23)

IDAPA 35.01.01.326 (Reserved)

IDAPA 35.01.01.330 Apportionable and Nonapportionable Income Defined: Apportionment

AND ALLOCATION (RULE 330).

Section 63-3027(1), Idaho Code. Sections 63-3027(1)(a) and 63 -3027(1)(h), Idaho Code, require that every item of income be classified either as apportionable income or nonapportionable income. Income for purposes of classification as apportionable or nonapportionable includes gains and losses. Apportionable income is apportioned among jurisdictions by use of a formula. Nonapportionable income is specifically assigned or allocated to one (1) or more specific jurisdictions pursuant to express rules. An item of income is classified as apportionable income if it falls within the definition of apportionable income. An item of income is nonapportionable income only if it does not meet the definitional requirements for being classified as apportionable income.(4-6-23)

IDAPA 35.01.01.331 Apportionable and Nonapportionable Income Defined:

APPORTIONABLE

INCOME (RULE 331).

Section 63-3027(a)(1), Idaho Code In General. Apportionable income means income of any type or class and from any activity that meets the “transactional test” described in Rule 332 of these rules, or the “functional test” described in Rule 333 of these rules. The classification of income by the labels occasionally used, such as manufacturing income, compensation for services, sales income, interest, dividends, rents, royalties, gains, operating income, and nonoperating income, is of no aid in determining whether income is apportionable or nonapportionable income.

02.Terms Used in Definition of Apportionable Income and in Application of Definition. As used in the definition of apportionable income and in the application of the definition.(4-6-23) a.“Trade or business” means the unitary business of the taxpayer, part of which is conducted within b.“To contribute materially” includes, without limitation, “to be used operationally in the taxpayer’s trade or business.” Whether property materially contributes is not determined by reference to the property’s value or percentage of use. If an item of property materially contributes to the taxpayer’s trade or business, the attributes, rights or components of that property are also operationally used in that business. However, property that is held for mere financial betterment is not operationally used in the taxpayer’s trade or business.(4-6-23)

IDAPA 35.01.01.332 Apportionable and Nonapportionable Income Defined:

TRANSACTIONAL

TEST (RULE 332).

In General. Apportionable income includes income arising from transactions and activity in the regular course of the taxpayer’s trade or business.(4-6-23)

02.Apportionable Income for Idaho. If the transaction or activity is in the regular course of the taxpayer’s trade or business, part of which trade or business is conducted within Idaho, the resulting income of the transaction or activity is apportionable income for Idaho. Income may be apportionable income even though the actual transaction or activity that gives rise to the income does not occur in Idaho.(4-6-23)

03.Regular Course of the Taxpayer’s Trade or Business. For a transaction or activity to be in the regular course of the taxpayer’s trade or business, the transaction or activity need not be one that frequently occurs in the trade or business. Most, but not all, frequently occurring transactions or activities will be in the regular course of that trade or business and will, therefore, satisfy the transactional test. It is sufficient to classify a transaction or activity as being in the regular course of a trade or business, if it is reasonable to conclude transactions of that type are customary in the kind of trade or business being conducted or are within the scope of what that kind of trade or business does. However, even if a taxpayer frequently or customarily engages in investment activities, if those activities are for the taxpayer’s mere financial betterment rather than for the operations of the trade or business, such activities do not satisfy the transactional test. The transactional test includes, but is not limited to, income from sales of inventory, property held for sale to customers, and services that are commonly sold by the trade or business. The transactional test also includes, but is not limited to, income from the sale of property used in the production of apportionable income of a kind that is sold or replaced with some regularity, even if replaced less frequently than once a year.(4-6-23)

IDAPA 35.01.01.333 Apportionable and Nonapportionable Income Defined: Functional Test

(RULE 333).

In General. Apportionable income also includes income from tangible and intangible property, if the acquisition, management or disposition of the property constitutes an integral or necessary part of the taxpayer’s regular trade or business operations.(4-6-23)

02.Terms.(4-6-23) a.“Property” includes any interest in, control over, or use in property (whether the interest is held directly, beneficially, by contract, or otherwise) that materially contributes to the production of apportionable income. b.“Acquisition” refers to the act of obtaining an interest in property.(4-6-23) c.“Management” refers to the oversight, direction, or control (directly or by delegation) of the property for the use or benefit of the trade or business.(4-6-23) d.“Disposition” refers to the act, or the power, to relinquish or transfer an interest in or control over property to another, in whole or in part.(4-6-23) e.“Integral part” refers to property that constituted a part of the composite whole of the trade or business, each part of which gave value to every other part, in a manner that materially contributed to the production of apportionable income.(4-6-23)

03.Integral, Functional, or Operative Component of Trade or Business. Under the functional test, apportionable income need not be derived from transactions or activities that are in the regular course of the taxpayer’s own particular trade or business. It is sufficient, if the property from which the income is derived is or was an integral, functional, or operative component used in the taxpayer’s trade or business operations, or otherwise materially contributed to the production of apportionable income of the trade or business, part of which trade or business is or was conducted within Idaho. Depending on the facts and circumstances of each case, property that has been converted to nonapportionable use through the passage of a sufficiently lengthy period of time or that has been removed as an operational asset and is instead held by the taxpayer’s trade or business exclusively for investment purposes has lost its character as a business asset and is not subject to the rule of the preceding sentence. Property that was an integral part of the trade or business is not considered converted to investment purposes merely because it is placed for sale.(4-6-23)

04.Examples of Apportionable Income Under the Functional Test. Income that is derived from isolated sales, leases, assignments, licenses, and other infrequently occurring dispositions, transfers, or transactions involving property, including transactions made in liquidation or the winding-up of business, is apportionable income, if the property is or was used in the taxpayer's trade or business operations. Income from the licensing of an intangible asset, such as a patent, copyright, trademark, service mark, know-how, trade secrets, or the like, that was developed or acquired for use by the taxpayer in its trade or business operations, constitutes apportionable income whether or not the licensing itself constituted the operation of a trade or business, and whether or not the taxpayer remains in the same trade or business from or for which the intangible asset was developed or acquired.(4-6-23)

05.Operational Function Versus Investment Function. Under the functional test, income from intangible property is apportionable income when the intangible property serves an operational function as opposed to solely an investment function. The relevant inquiry focuses on whether the property is or was held in furtherance of the taxpayer’s trade or business, that is, on the objective characteristics of the intangible property’s use or acquisition and its relation to the taxpayer and the taxpayer’s activities. The functional test is not satisfied where the holding of the property is limited to solely an investment function as is the case where the holding of the property is limited to mere financial betterment of the taxpayer in general.(4-6-23)

06.Property Held in Furtherance of Trade or Business. If the property is or was held in furtherance of the taxpayer’s trade or business beyond mere financial betterment, then income from that property may be apportionable income even though the actual transaction or activity involving the property that gives rise to the income does not occur in Idaho.(4-6-23)

07.Presumptions. If with respect to an item of property a taxpayer takes a deduction from apportionable income that is apportioned to Idaho or includes the original cost in the property factor, it is presumed that the item or property is or was integral to the taxpayer’s trade or business operations. No presumption arises from the absence of any of these actions.(4-6-23)

08.Application of the Functional Test. Application of the functional test is generally unaffected by the form of the property (for example, tangible or intangible property, real or personal property). Income arising from an intangible interest, for example, corporate stock or other intangible interest in a business or a group of assets, is apportionable income when the intangible itself or the property underlying or associated with the intangible is or was an integral, functional, or operative component to the taxpayer’s trade or business operations. Thus, while apportionment of income derived from transactions involving intangible property as apportionable income may be supported by a finding that the issuer of the intangible property and the taxpayer are engaged in the same trade or business, i.e., the same unitary business, establishment of such a relationship is not the exclusive basis for concluding that the income is subject to apportionment. It is sufficient to support the finding of apportionable income if the holding of the intangible interest served an operational rather than an investment function of mere financial betterment.(4-6-23)

IDAPA 35.01.01.334 Apportionable and Nonapportionable Income Defined: Relationship of

TRANSACTIONAL AND FUNCTIONAL TESTS TO U.S. CONSTITUTION (RULE 334).

The Due Process Clause and the Commerce Clause of the U.S. Constitution restrict states from apportioning income as apportionable income that has no rational relationship with the taxing state. The protection against extraterritorial state taxation afforded by these Clauses is often described as the “unitary business principle.” The unitary business principle requires apportionable income to be derived from the same unitary business that is being conducted at least in part in Idaho. The unitary business that is conducted in Idaho includes both a unitary business that the taxpayer alone may be conducting and a unitary business the taxpayer may conduct with any other person or persons.

Satisfaction of either the transactional test or the functional test complies with the unitary business principle, because each test requires that the transaction or activity (in the case of the transactional test) or the property (in the case of the functional test) to be tied to the same trade or business that is being conducted within Idaho. Determination of the scope of the unitary business being conducted in Idaho is without regard to the extent to which Idaho requires or permits combined reporting.(4-6-23)

IDAPA 35.01.01.335 Nonapportionable Income (rule 335)

Section 63-3027(1)(h), Idaho Code Nonapportionable Income. Nonapportionable income is all income other than apportionable income. All deductions relating to the production of nonapportionable income is to be allocated with the income produced. Any allowable deduction that applies to both apportionable and nonapportionable income of the taxpayer is to be prorated to those classes of income to determine income subject to tax. When used in these rules, the term nonapportionable income includes nonapportionable losses unless the context clearly indicates otherwise.(4-6-23)

02.Offset of Interest Expense Against Nonapportionable Income. Interest on indebtedness incurred or continued to purchase or to carry investment that generates nonapportionable income is offset against the income produced. If the facts do not support such a matching of the interest expense to the nonapportionable income, the portion of the taxpayer's interest expense that is offset against income from nonapportionable investments is to be an amount that bears the same ratio to the aggregate amount allowable to the taxpayer as a deduction for interest for the taxable year as the taxpayer's nonapportionable income mentioned in the preceding sentence bears to the taxpayer's total income for the taxable year. Aggregate amount allowable means the taxpayer's total interest expense deducted in determining taxable income as defined in Section 63-3011B, Idaho Code, plus interest expense disallowed under Sections 265 and 291 of the Internal Revenue Code, plus interest expense from a pass-through entity, plus the interest expense of a corporation that, pursuant to Sections 63-3027 and 63-3027B through 63-3027E, Idaho Code, is included in a combined report with the taxpayer for the taxable year. See Rule 115 of these rules for the calculation of total income.(4-6-23)

03.Allocated to Idaho. Nonapportionable income, net of interest and other related expense offsets, that is attributable to Idaho is allocated to Idaho.(4-6-23)

04.Allocated to Other States. Nonapportionable income, together with interest and other related expense offsets, is allocated to other states if it is not attributable to Idaho.(4-6-23)

IDAPA 35.01.01.336 Apportionable and Nonapportionable Income: Application of Definitions

(RULE 336).

Section 63-3027(1)(a), 63-3027(1)(h), Idaho Code In General. The following applies the foregoing principles for purposes of determining whether particular income is apportionable or nonapportionable income.(4-6-23)

02.Rent From Real and Tangible Personal Property. Rental income from real and tangible property is apportionable income if the property for which the rental income was received is or was used in the taxpayer’s trade or business and, therefore, is includable in the property factor under Rule 465 of these rules.(4-6-23)

03.Gains or Losses from Sales of Assets. Gain or loss from the sale, exchange or other disposition of real property or of tangible or intangible personal property is apportionable income if the property while owned by the taxpayer was used in, or was otherwise included in the property factor of the taxpayer’s trade or business.

However, if the property was used to produce nonapportionable income, the gain or loss is nonapportionable income.

04.Interest Income. Interest income from an intangible is apportionable income if the intangible arises out of or was created in the regular course of the taxpayer’s trade or business operations or if the purpose for acquiring and holding the intangible is an integral, functional, or operative component of the taxpayer’s trade or business operations, or otherwise materially contributes to the production of apportionable income of the trade or business operations.(4-6-23)

05.Dividends. Dividends from stock are apportionable income if the stock arises out of or was acquired in the regular course of the taxpayer’s trade or business operations or where the purpose of acquiring and holding the stock is an integral, functional, or operative component of the taxpayer’s trade or business operations, or otherwise materially contributes to the production of apportionable income of the trade or business operations.

06.Patent and Copyright Royalties. Royalties from patents and copyrights are apportionable income if the patent or copyright arises out of or was created in the regular course of the taxpayer’s trade or business operations or if the purpose for acquiring and holding the patent or copyright is an integral, functional, operative component of the taxpayer’s trade or business operations, or otherwise materially contributes to the production of apportionable income of the trade or business operations.(4-6-23)

IDAPA 35.01.01.337 (Reserved)

IDAPA 35.01.01.340 Principles for Determining the Existence of a Unitary Business: Unitary

BUSINESS PRINCIPLE (RULE 340).

The Concept of a Unitary Business.(4-6-23)

a.A unitary business is a single economic enterprise that is made up either of separate parts of a single business entity or of a commonly controlled group of business entities that are sufficiently interdependent, integrated and interrelated through their activities so as to provide a synergy and mutual benefit that produces a sharing or exchange of value among them and a significant flow of value to the separate parts. This flow of value to a business entity located in Idaho that comes from being part of a unitary business conducted both within and without Idaho is what provides the constitutional due process “definite link and minimum connection” necessary for Idaho to apportion apportionable income of the unitary business, even if that income arises in part from activities conducted outside Idaho. The apportionable income of the unitary business is then apportioned to Idaho using an apportionment percentage provided by Section 63-3027, Idaho Code.(4-6-23)

b.This sharing or exchange of value may also be described as requiring that the operation of one (1)

part of the business be dependent upon, or contribute to, the operation of another part of the business. Phrased in the disjunctive, the foregoing means that if the activities of one (1) business either contribute to the activities of another business or are dependent upon the activities of another business, those businesses are part of a unitary business.

02.Constitutional Requirement for a Unitary Business.(4-6-23)

a.The sharing or exchange of value described in Subsection 340.01 of this rule that defines the scope of a unitary business requires more than the mere flow of funds arising out of a passive investment or from the financial strength contributed by a distinct business undertaking that has no operational relationship to the unitary

b.In Idaho, the unitary business principle will be applied to the fullest extent allowed by the U.S.

Constitution. The unitary business principle will not be applied to result in the combination of business activities or entities under circumstances where, if it were adverse to the taxpayer, the combination of such activities or entities would not be allowed by the U.S. Constitution.(4-6-23)

03.Separate Trades or Businesses Conducted Within a Single Entity. A single entity may have more than one (1) unitary business. In such cases it is necessary to determine the business, or apportionable, income attributable to each separate unitary business as well as its nonapportionable income, which is specifically allocated.

The apportionable income of each unitary business is then apportioned by a formula that takes into consideration the in-state and the out-of-state factors that relate to the respective unitary business whose income is being apportioned.

04.Unitary Business Unaffected by Formal Business Organization. A unitary business may exist within a single business entity or among a commonly controlled group of business entities. The relationship is to be determined by reference to the relationship that exists between all related and affiliated corporations, not just those corporations whose income and apportionment factors are required to be considered. For example, the relationship with foreign affiliates is to be considered even though a water’s edge election is made. A related corporation may include insurance companies and fifty percent (50%) or less owned corporations. The scope of what is included in a commonly controlled group of business entities is set forth in Rule 344 of these rules.(4-6-23)

IDAPA 35.01.01.341 Principles for Determining the Existence of a Unitary Business:

DETERMINA

TION OF A UNITARY BUSINESS (RULE 341).

In General. Unity can be established under any one (1) of the judicially acceptable tests (Butler Brothers, Edison California Stores, Container, etc.), and cannot be denied merely because another of those tests does not simultaneously apply.(4-6-23)

02.Significant Flows of Value. A unitary business is characterized by significant flows of value evidenced by factors such as those described in Mobil Oil Corp. v. Vermont, 445 U.S. 425 (1980): functional integration, centralization of management, and economies of scale. These factors provide evidence of whether the business activities operate as an integrated whole or exhibit substantial mutual interdependence. Facts suggesting the presence of the factors mentioned above should be analyzed in combination for their cumulative effect and not in isolation. A particular business operation may be suggestive of one (1) or more of the factors mentioned above.

IDAPA 35.01.01.342 Principles for Determining the Existence of a Unitary Business:

DESCRIPTION AND ILLUSTRATION OF FUNCTIONAL INTEGRATION, CENTRALIZATION OF

MANAGEMENT AND ECONOMIES OF SCALE (RULE 342).

Functional Integration. Functional integration refers to transfers between, or pooling among, business activities that significantly affect the operation of the business activities. Functional integration includes, but is not limited to, transfers or pooling with respect to the unitary business’s products or services, technical information, marketing information, distribution systems, purchasing, and intangibles such as patents, trademarks, service marks, copyrights, trade secrets, know-how, formulas, and processes. There is no specific type of functional integration that must be present. The following is a list of examples of business operations that can support the finding of functional integration. The order of the list does not establish a hierarchy of importance.(4-6-23)

a.Sales, exchanges, or transfers (collectively “sales”) of products, services, or intangibles between business activities provide evidence of functional integration. The significance of the intercompany sales to the finding of functional integration will be affected by the character of what is sold and the percentage of total sales or purchases represented by the intercompany sales. For example, sales among business entities that are part of a vertically integrated unitary business are indicative of functional integration. Functional integration is not negated by the use of a readily determinable market price to effect the intercompany sales, because such sales can represent an assured market for the seller or an assured source of supply for the purchaser.(4-6-23)

b.Common Marketing. The sharing of common marketing features among business entities is an indication of functional integration when such marketing results in significant mutual advantage. Common marketing exists when a substantial portion of the business entities’ products, services, or intangibles are distributed or sold to a common customer, when the business entities use a common trade name or other common identification, or when the business entities seek to identify themselves to their customers as a member of the same enterprise. The use of a common advertising agency or a commonly owned or controlled in-house advertising office does not by itself establish common marketing that is suggestive of functional integration. (Such activity, however, is relevant to determining the existence of economies of scale and centralization of management.)(4-6-23)

c.Transfer or Pooling of Technical Information or Intellectual Property. Transfers or pooling of technical information or intellectual property, such as patents, copyrights, trademarks and service marks, trade secrets, processes or formulas, know-how, research, or development, provide evidence of functional integration when the matter transferred is significant to the businesses’ operations.(4-6-23)

d.Common Distribution System. Use of a common distribution system by the business entities, under which inventory control and accounting, storage, trafficking, or transportation are controlled through a common network provides evidence of functional integration.(4-6-23)

e.Common Purchasing. Common purchasing of substantial quantities of products, services, or intangibles from the same source by the business entities, particularly where the purchasing results in significant cost savings or where products, services, or intangibles are not readily available from other sources and are significant to each entity’s operations or sales, provides evidence of functional integration.(4-6-23) f.

Common or Intercompany Financing. Significant common or intercompany financing, including the guarantee by, or the pledging of the credit of, one (1) or more business entities for the benefit of another business entity or entities provides evidence of functional integration, if the financing activity serves an operational purpose of both borrower and lender. Lending which serves an investment purpose of the lender does not necessarily provide evidence of functional integration. (See Subsection 342.02 of this rule for discussion of centralization of management.)(4-6-23)

02.Centralization of Management. Centralization of management exists when directors, officers, or other management employees jointly participate in the management decisions that affect the respective business activities and that may also operate to the benefit of the entire economic enterprise. Centralization of management can exist whether the centralization is effected from a parent entity to a subsidiary entity, from a subsidiary entity to a parent entity, from one (1) subsidiary entity to another, from one (1) division within a single business entity to another division within a business entity, or from any combination of the foregoing. Centralization of management may exist even when day-to-day management responsibility and accountability has been decentralized, so long as the management has an ongoing operational role with respect to the business activities. An operational role can be effected through mandates, consensus building, or an overall operational strategy of the business, or any other mechanism that establishes joint management.(4-6-23)

a.Facts Providing Evidence of Centralization of Management. Evidence of centralization of management is provided when common officers participate in the decisions relating to the business operations of the different segments. Centralization of management may exist when management shares or applies knowledge and expertise among the parts of the business. Existence of common officers and directors, while relevant to a showing of centralization of management, does not alone provide evidence of centralization of management. Common officers are more likely to provide evidence of centralization of management than are common directors.(4-6-23)

b.Stewardship Distinguished. Centralized efforts to fulfill stewardship oversight are not evidence of centralization of management. Stewardship oversight consists of those activities that any owner would take to review the performance of or safeguard an investment. Stewardship oversight is distinguished from those activities that an owner may take to enhance value by integrating one (1) or more significant operating aspects of one (1) business activity with the other business activities of the owner. For example, implementing reporting requirements or mere approval of capital expenditures may evidence only stewardship oversight.(4-6-23)

03.Economies of Scale. Economies of scale refers to a relation among and between business activities resulting in a significant decrease in the average per unit cost of operational or administrative functions due to the increase in operational size. Economies of scale may exist from the inherent cost savings that arise from the presence of functional integration or centralization of management. The following are examples of business operations that can support the finding of economies of scale. The order of the list does not establish a hierarchy of importance. (4-6-23)

a.Centralized Purchasing. Centralized purchasing designed to achieve savings due to the volume of purchases, the timing of purchases, or the interchangeability of purchased items among the parts of the business engaging in the purchasing provides evidence of economies of scale.(4-6-23)

b.Cent ralized Administrative Functions. The performance of traditional corporate administrative functions, such as legal services, payroll services, pension and other employee benefit administration, in common among the parts of the business may result in some degree of economies of scale. A business entity that secures savings in the performance of corporate administrative services due to its affiliation with other business entities that it would not otherwise reasonably be able to secure on its own because of its size, financial resources, or available market, provides evidence of economies of scale.(4-6-23)

IDAPA 35.01.01.343 Principles for Determining the Existence of a Unitary Business:

INDICATORS OF A UNITARY BUSINESS (RULE 343).

Same Type of Business. Business activities that are in the same general line of business generally constitute a single unitary business, for example, a multistate grocery chain.(4-6-23)

02.Steps in a Vertical Process. Business activities that are part of different steps in a vertically structured business almost always constitute a single unitary business. For example, a business engaged in the exploration, development, extraction, and processing of a natural resource and the subsequent sale of a product based upon the extracted natural resource, is engaged in a single unitary business, regardless of the fact that the various steps in the process are operated substantially independently of each other with only general supervision from the business’s executive offices.(4-6-23)

03.Strong Centralized Management. Business activities that might otherwise be considered as part of more than one (1) unitary business may constitute one (1) unitary business when there is a strong centralized management, coupled with the existence of centralized departments for such functions as financing, advertising, research, or purchasing. Strong centralized management exists when a central manager or group of managers makes substantially all of the operational decisions of the business. For example, some businesses conducting diverse lines of business may properly be considered as engaged in only one (1) unitary business when the central executive officers are actively involved in the operations of the various business activities and there are centralized offices that perform for the business activities the normal matters that a truly independent business would perform for itself, such as personnel, purchasing, advertising, or financing.(4-6-23)

IDAPA 35.01.01.344 Principles for Determining the Existence of a Unitary Business:

COMMONLY CONTROLLED GROUP OF BUSINESS ENTITIES (RULE 344).

In General. Separate corporations can be a part of a unitary business only if they are members of a commonly controlled group.(4-6-23)

02.Commonly Controlled Group. A “commonly controlled group” means any of the following:

a.A parent corporation and any one (1) or more corporations or chains of corporations, connected through stock ownership (or constructive ownership) with the parent, but only if:(4-6-23)

i.The parent owns stock possessing more than fifty percent (50%) of the voting power of a least one (1) corporation, and, if applicable,(4-6-23)

ii.Stock cumulatively possessing more than fifty percent (50%) of the voting power of each of the corporations, except the parent, is owned by the parent, one (1) or more corporations described in Subparagraph 344.02.a.i., of this rule, or one (1) or more other corporations that satisfy the conditions of this subparagraph.

b.Any two (2) or more corporations, if stock, possessing more than fifty percent (50%) of the voting power of the corporations is owned, or constructively owned, by the same person.(4-6-23)

c.Any two (2) or more corporations that constitute stapled entities.(4-6-23)

i.For purposes of this paragraph, “stapled entities” means any group of two (2) or more corporations if more than fifty percent (50%) of the ownership or beneficial ownership of the stock possessing voting power in each corporation consists of stapled interests.(4-6-23)

ii.Two (2) or more interests are stapled interests if, by reason of form of ownership, restrictions on transfer, or other terms or conditions, in connection with the transfer of one (1) of the interests the other interest or interests are also transferred or required to be transferred.(4-6-23)

d.Any two (2) or more corporations, if stock possessing more than fifty percent (50%) of the voting power of the corporations is cumulatively owned (without regard to the constructive ownership rules of Paragraph 344.05.a., of this rule) by, or for the benefit of, members of the same family. Members of the same family are limited to an individual, the individual’s spouse, parents, brothers, sisters, grandparents, children and grandchildren, and their respective spouses.(4-6-23)

03.Elections and Terminations.(4-6-23)

a.If, in the application of Subsection 344.02 of this rule, a corporation is a member of more than one (1) commonly controlled group of corporations, the corporation elects to be treated as a member of only the commonly controlled group (or part thereof) with respect to which it has a unitary business relationship. If the corporation has a unitary business relationship with more than one (1) of those groups, it elects to be treated as a member of only one (1) of the commonly controlled groups with respect to which it has a unitary business relationship. This election remains in effect until the unitary business relationship between the corporation and the rest of the members of its elected commonly controlled group is discontinued, or unless revoked with the approval of the State Tax Commission.(4-6-23)

b.Membership in a commonly controlled group is to be treated as terminated in any year, or fraction thereof, in which the conditions of Subsection 344.02 of this rule are not met, except as follows:(4-6-23)

i.When stock of a corporation is sold, exchanged, or otherwise disposed of, the membership of a corporation in a commonly controlled group will not be terminated, if the requirements of Subsection 344.02 of this rule are again met immediately after the sale, exchange, or disposition.(4-6-23)

ii.The State Tax Commission may treat the commonly controlled group as remaining in place if the conditions of Subsection 344.02 of this rule are again met within a period not to exceed two (2) years.(4-6-23)

04.Controlled. A taxpayer may exclude some or all corporations included in a “commonly controlled group” by reason of Paragraph 344.02.d., of this rule by showing that those members of the group are not controlled directly or indirectly by the same interest, within the meaning of the same phrase in Section 482 of the Internal Revenue Code. For purposes of this subsection, the term “controlled” includes any kind of control, direct or indirect, whether legally enforceable, and however exercisable or exercised.(4-6-23)

05.Stock Ownership. Except as otherwise provided, stock is “owned” when title to the stock is directly held or if the stock is constructively owned.(4-6-23)

a.An individual constructively owns stock that is owned by any of the following:(4-6-23)

i.The individual’s spouse.(4-6-23)

ii.Children, including adopted children, of that individual or the individual’s spouse, who have not attained the age of twenty-one (21) years.(4-6-23)

iii.An estate or trust, of which the individual is an executor, trustee, or grantor, to the extent that the estate or trust is for the benefit of that individual’s spouse or children.(4-6-23)

b.Stock owned by a corporation, or a member of a controlled group of which the corporation is the parent corporation, is constructively owned by any shareholder owning stock that represents more than fifty percent (50%) of the voting power of the corporation.(4-6-23)

c.In the application of Paragraph 344.02.d., of this rule, (dealing with stock possessing voting power held by members of the same family), if more than fifty percent (50%) of the stock possessing voting power of a corporation is, in the aggregate, owned by or for the benefit of members of the same family, stock owned by that corporation is to be treated as constructively owned by members of that family in the same ratio as the proportion of their respective ownership of stock possessing voting power in that corporation to all of such stock of that corporation.(4-6-23)

d.Except as otherwise provided, stock owned by a partnership is constructively owned by any partner, other than a limited partner, in proportion to the partner’s capital interest in the partnership. For this purpose, a partnership is treated as owning proportionately the stock owned by any other partnership in which it has a tiered interest, other than as a limited partner.(4-6-23)

e.In any case where a member of a commonly controlled group, or shareholders, officers, directors, or employees of a member of a commonly controlled group, is a general partner in a limited partnership, stock held by the limited partnership is constructively owned by a limited partner to the extent of its capital interest in the limited partnership.(4-6-23)

f.In the application of Paragraph 344.02.d., of this rule (dealing with stock possessing voting power held by members of the same family), stock held by a limited partnership is constructively owned by a limited partner to the extent of the limited partner’s capital interest in the limited partnership.(4-6-23)

06.Terms. For purposes of the definition of a commonly controlled group, each of the following applies:(4-6-23) a.“Corporation” means a corporation as defined in Section 63-3006, Idaho Code.(4-6-23) b.“Person” means a person as defined in Section 63-3005, Idaho Code.(4-6-23) c.“Voting power” means the power of all classes of stock entitled to vote that possess the power to elect the membership of the board of directors of the corporation.(4-6-23) d.“More than fifty percent (50%) of the voting power” means voting power sufficient to elect a majority of the membership of the board of directors of the corporation.(4-6-23) e.“Stock possessing voting power” includes stock where ownership is retained but the actual voting power is transferred in either of the following manners:(4-6-23)

i.For one (1) year or less.(4-6-23)

ii.By proxy, voting trust, written shareholder agreement, or by similar device, where the transfer is revocable by the transferor.(4-6-23)

f.In the case of an entity treated as a corporation under Paragraph 344.06.a., of this rule, “stock possessing voting power” refers to an instrument, contract, or similar document demonstrating an ownership interest in that entity that confers power in the owner to cast a vote in the selection of the management of that entity. (4-6-23)

IDAPA 35.01.01.345 (Reserved)

IDAPA 35.01.01.350 Proration of Deductions (rule 350)

In General. In most cases a taxpayer’s allowable deduction applies only to the apportionable income arising from a particular trade or business or to a particular item of nonapportionable income. In some cases an allowable deduction applies to the apportionable income of more than one trade or business, to several items of nonapportionable income, or to both. In these cases the deduction is to be prorated among the trades or businesses and the items of nonapportionable income in a manner that fairly distributes the deduction among the classes of income to which it applies.(4-6-23)

02.Year to Year Consistency. If a taxpayer departs from or modifies the method used for prorating any deduction in prior year Idaho returns, the taxpayer is to disclose the nature and extent of all modifications in its current year return.(4-6-23)

03.State to State Consistency. If the returns or reports filed by a taxpayer with all states to which the taxpayer reports pursuant to Section 63-3027, Idaho Code; Article IV of the Multistate Tax Compact; or the Uniform Division of Income for Tax Purposes Act are not uniform in applying or prorating any deduction, the taxpayer is to disclose the nature and extent of the variance in its current year Idaho return.(4-6-23)

IDAPA 35.01.01.351 (Reserved)

IDAPA 35.01.01.355 Application of Section 63-3027 -- Apportionment (rule 355)

Section 63-3027, Idaho Code. If a corporation has business activity both within and without Idaho, and is taxable in another state as a result of this business activity, the portion of the net income or net loss derived from sources in Idaho will be determined by apportionment pursuant to Section 63-3027, Idaho Code.(4-6-23)

IDAPA 35.01.01.356 (Reserved)

IDAPA 35.01.01.360 Application of Section 63-3027 -- Combined Report (rule 360)

Section 63-3027, Idaho Code. If a particular trade or business is carried on by a corporation and one (1) or more affiliates, nothing in these rules is to preclude using a combined report in which the entire apportionable income of the trade or business is apportioned pursuant to Section 63-3027, Idaho Code. The use of the combined report is restricted to C corporations.(4-6-23)

IDAPA 35.01.01.361 (Reserved)

IDAPA 35.01.01.365 Use of the Combined Report (rule 365)

In General. Use of the combined report does not disregard the separate corporate identities of the members of the unitary group. The combined report is simply the computation, by the formula apportionment method, of the unitary apportionable income reportable to Idaho by the separate corporate members of the unitary group. For purposes of this rule, included corporation means a corporation required to file an Idaho income tax return as a result of its own activities in Idaho and using a combined report.(4-6-23)

02.Separate Computations. Each included corporation will:(4-6-23)

a.Be responsible for computing and paying its tax including any minimum tax due pursuant to Sections 63-3025 and 63-3025A, Idaho Code, as determined by the combined report;(4-6-23)

b.Separately compute Idaho tax credits and limitations, except the investment tax credit, which is applied pursuant to Section 63-3029B, Idaho Code, and Rules 710 through 717 of these rules; and(4-6-23)

c.Separately determine and pay the permanent building fund tax required by Section 63-3082, Idaho

03.Net Operating Loss. The Idaho net operating loss carryover or carryback for each included corporation is limited to its share of the combined net operating loss apportioned to Idaho for each taxable year. See Rule 200 of these rules.(4-6-23)

04.Nexus. Each corporation is to determine whether it has nexus in Idaho based on its activities or those conducted on its behalf.(4-6-23)

05.Throwback Sales. When a corporation’s activities conducted in a state are within the protection of Public Law 86-272, the principle established in Appeal of Joyce, Inc., California State Board of Equalization, November 23, 1966, commonly known as the Joyce Rule, applies. Therefore, only the activities conducted by or on behalf of the corporation is to be considered for this purpose.(4-6-23)

06.Filing Returns. Each included corporation may file a separate return reporting its share of the combined net income or loss of the unitary group. In the alternative, the unitary group may elect to file a group return for all the included corporations. This election is allowed as a convenience to the taxpayer. Its use does not preclude the need for the separate recognition and computational requirements in this rule.(4-6-23)

07.Dividends and Other Intangible Income. Dividends and other intangible income is to be included in income subject to apportionment to the extent they constitute apportionable income received from companies not included in the combined report. However, a dividend deduction and factor adjustments are allowed to the extent dividends received are paid from prior year earnings previously included in income subject to apportionment. Part I, Subchapter C, Internal Revenue Code, is applied to determine the taxable year in which the earnings and profits were earned that paid the dividend. It is the taxpayer’s responsibility to prove that the dividend, or a portion of it, was previously included in Idaho apportionable income.(4-6-23)

IDAPA 35.01.01.366 (Reserved)

IDAPA 35.01.01.370 Application of Section 63-3027 -- Allocation (rule 370)

Section 63-3027, Idaho Code. A taxpayer sub ject to the taxing jurisdiction of Idaho allocates all of its nonapportionable income or loss within or without Idaho pursuant to Section 63-3027, Idaho Code.(4-6-23)

IDAPA 35.01.01.371 (Reserved)

IDAPA 35.01.01.375 Consistency and Uniformity in Reporting (rule 375)

01.Year to Year Consistency. If a taxpayer departs from or modifies the method used for classifying income as apportionable income or nonapportionable income in prior year Idaho returns, the taxpayer is to disclose the nature and extent of all modifications in its current year return.(4-6-23)

02.State to State Consistency. If the returns or reports filed by a taxpayer with all states to which the taxpayer reports pursuant to Section 63-3027, Idaho Code; Article IV of the Multistate Tax Compact; or the Uniform Division of Income for Tax Purposes Act are not uniform in classifying apportionable and nonapportionable income, the taxpayer is to disclose the nature and extent of the variance in its current year Idaho return.(4-6-23)

IDAPA 35.01.01.376 (Reserved)

IDAPA 35.01.01.385 Taxable in Another State: in General (rule 385)

Section 63-3027(4), Idaho Code In General. A taxpayer is subject to the allocation and apportionment provisions of Section 63- 3027, Idaho Code, if it has income from business activity that is taxable both within and without Idaho. A taxpayer’s income from business activity is taxable without Idaho if the taxpayer is taxable in another state within the meaning of Section 63-3027(4), Idaho Code, as a result of that business activity. A taxpayer is taxable in another state if it meets either of the following tests:(4-6-23)

a.The taxpayer is subject to one (1) of the taxes specified in Section 63-3027(4)(a), Idaho Code, as a result of its business activity in another state; or(4-6-23)

b.Another state has jurisdiction to subject the taxpayer to a net income tax as a result of its business activity, regardless of whether the state imposes the tax on the taxpayer.(4-6-23)

02.Not Taxable in Another State. A taxpayer is not taxable in another state with respect to a particular trade or business merely because the taxpayer conducts activities in the other state pertaining to the production of nonapportionable income or business activities relating to a separate trade or business.(4-6-23)

IDAPA 35.01.01.386 (Reserved)

IDAPA 35.01.01.390 Taxable in Another State: When a Taxpayer Is Subject to Tax (rule 390)

Section 63-3027(4)(a), Idaho Code Subject to Tax. A taxpayer is subject to one of the taxes specified in Section 63-3027(4)(a), Idaho Code, if it carries on business activity in a state and that state imposes one of those taxes on it. A taxpayer that claims it is subject to one (1) of the taxes specified in Section 63-3027(4)(a), Idaho Code, is to furnish the Tax Commission, at its request, evidence to support this claim. The Tax Commission may request that evidence include proof the taxpayer has filed the required tax return in the other state and has paid any taxes imposed by the law of that state.

The taxpayer’s failure to provide proof may be considered in determining whether the taxpayer is subject to one of the taxes specified in Section 63-3027(4)(a), Idaho Code.(4-6-23)

02.Concept of Taxability. The concept of taxability in another state is based on the premise that every state in which the taxpayer transacts business may impose an income tax even though every state does not do so. A state may impose other types of taxes as a substitute for an income tax. Only those taxes specified in Section 63- 3027(4)(a), Idaho Code, that are revenue producing rather than regulatory in nature is to be considered in determining taxability in another state.(4-6-23)

03.Examples of Taxability.(4-6-23)

a.State A requires each corporation that qualifies or registers in State A to pay the Secretary of State an annual license fee or tax for the privilege of doing business in the state, regardless of whether it exercises the privilege. The amount paid is determined according to the total authorized capital stock of the corporation; the rates progressively increase. The statute sets a minimum fee of fifty dollars ($50) and a maximum fee of five hundred dollars ($500). Failure to pay the tax bars a corporation from using the state courts to enforce its rights. State A also imposes a corporation income tax. Corporation X is qualified in State A and pays the required fee to the Secretary of State, but does not transact business in State A, although it may use the courts of State A. Corporation X is not taxable in State A.(4-6-23)

b.Assume the same facts as in Subsection 390.03.a., except that Corporation X is subject to and pays the corporation income tax. Payment is prima facie evidence that Corporation X is subject to the net income tax of State A and is taxable in State A.(4-6-23)

c.State B requires all corporations qualified or registered in State B to pay the Secretary of State an annual permit fee or tax for doing business in the state. The base of the fee or tax is the sum of: outstanding capital stock, and surplus and undivided profits. The fee or tax base attributable to State B is determined by a three (3) factor apportionment formula. Corporation X, which operates a plant in State B, pays the required fee or tax to the Secretary of State. Corporation X is taxable in State B.(4-6-23)

d.State A has a corporation franchise tax measured by net income for the privilege of doing business in that state. Corporation X files a return based on its business activity in the state, but the amount of computed liability is less than the minimum tax. Corporation X pays the minimum tax. Corporation X is subject to State A’s corporation franchise tax.(4-6-23)

04.Voluntary Tax Payment. A taxpayer is not subject to one (1) of the taxes specified in Section 63- 3027(4)(a), Idaho Code, if the taxpayer voluntarily files and pays the tax when not required to do so by the laws of that state.(4-6-23)

05.Minimum Tax or Fee. A taxpayer is not subject to one (1) of the taxes specified in Section 63- 3027(4)(a), Idaho Code if it pays a minimal fee for qualification, organization, or the privilege of doing business in that state, but:(4-6-23)

a.Does not transact business in that state; or(4-6-23)

b.Engages in business activity not sufficient for nexus, and the minimum tax bears no relationship to the taxpayer’s business activity within that state.(4-6-23)

c.Example. State A has a corporation franchise tax measured by net income for the privilege of doing business in that state. Corporation X files a return and pays the fifty dollar ($50) minimum tax, although it does not transact business in State A. Corporation X is not taxable in State A.(4-6-23)

IDAPA 35.01.01.391 (Reserved)

IDAPA 35.01.01.395 Taxable in Another State: When a State Has Jurisdiction to Subject a

TAXPAYER TO A NET INCOME TAX (RULE 395).

Section 63-3027(4)(b), Idaho Code In General. The test in Section 63-3027(4)(b), Idaho Code, applies if the taxpayer’s business activity is sufficient to give the state jurisdiction to impose a net income tax by reason of the business activity pursuant to the Constitution and statutes of the United States. Jurisdiction to tax is not present if the state is prohibited from imposing the tax due to Public Law 86-272, Title 15, Sections 381 through 385, United States Code.(4-6-23)

a.When determining if a state has jurisdiction to subject a taxpayer to a net income tax, the jurisdictional standards applicable to a state of the United States is to also apply to 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.(4-6-23)

b.The provisions of a treaty between a state and the United States are not considered when determining jurisdiction to tax.(4-6-23)

02.Example. Corporation X is engaged in manufacturing farm equipment in State A and in Foreign Country B. Both State A and Foreign Country B impose a net income tax but Foreign Country B exempts corporations engaged in manufacturing farm equipment. Corporation X is subject to the jurisdiction of State A and Foreign Country B.(4-6-23)

IDAPA 35.01.01.396 (Reserved)

IDAPA 35.01.01.450 Apportionment Formula (rule 450)

Section 63-3027(10), Idaho Code Apportionment Factors. All of a taxpayer’s apportionable income is to be apportioned to Idaho using the apportionment formula set forth in Section 63-3027(10), Idaho Code. Generally, a taxpayer’s apportionment formula consists of the sales factor only. Pursuant to Section 63-3027(10)(b), however, certain taxpayers may elect an apportionment formula that includes the property factor, the payroll factor, and the sales factor. See Rules 460 through 559 of these rules for general rules applicable to these factors. See Rules 560 through 599 of these rules for special rules and exceptions to the apportionment formula. The denominator of each factor may not exceed the sum of the numerators of that factor.(4-6-23)

02.Intercompany Transactions. Intercompany transactions are to be eliminated to the extent necessary to properly compute the numerators and the denominators of the apportionment factors of a combined group. The apportionment factor computation may not include property, payroll, or receipts of any affiliated corporation unless its income is included in the combined report.(4-6-23)

03.Rounding. The individual factors and the average apportionment factor is to be calculated six (6) digits to the right of the decimal point. If the seventh digit is five (5) or greater, the sixth digit is rounded to the next higher number. If the seventh digit is less than five (5), the sixth digit remains unchanged and any digits remaining to its right are dropped.(4-6-23)

04.Verification of Factors. The taxpayer is to make available the fifty-one (51) state apportionment factor detail when requested by the Tax Commission. Failure to do so may justify the imposition of the negligence penalty provided by Section 63-3046(a), Idaho Code.(4-6-23)

IDAPA 35.01.01.451 (Reserved)

IDAPA 35.01.01.460 Property Factor: in General (rule 460)

In General. The property factor of the apportionment formula for each trade or business of the taxpayer includes all real and tangible personal property owned or rented by the taxpayer and used during the taxable year in the regular course of its trade or business. The term real and tangible personal property includes land, buildings, fixtures, inventory, equipment, and other property of a tangible nature, but does not include coin or currency.(4-6-23)

02.Nonapportionable Income. Property used in connection with the production of nonapportionable income is to be excluded from the property factor. Property used both in the regular course of the taxpayer’s trade or business and in the production of nonapportionable income is to be included in the factor only to the extent the property is used in the regular course of the taxpayer’s trade or business. The method of determining that portion of the value to be included in the factor depends on the facts of each case.(4-6-23)

03.Average Value. The property factor is to reflect the average value of property includable in the factor. See Rule 490 of these rules.(4-6-23)

04.Denominator. The denominator of the factor may not exceed the sum of all the numerators.

IDAPA 35.01.01.461 (Reserved)

IDAPA 35.01.01.465 Property Factor: Property Used for the Production of Apportionable

INCOME (RULE 465).

a.Property is to be included in the property factor if it is used, is available for use, or capable of being used during the taxable year in the regular course of the taxpayer’s trade or business. Property held as reserves or standby facilities or property held as a reserve source of materials is to be included in the factor. For example, a plant temporarily idle or raw material reserves not currently being processed are includable in the factor.(4-6-23)

b.Property or equipment under construction during the taxable year, except inventoriable goods in process, is to be excluded from the factor until the property is used in the regular course of the taxpayer’s trade or

c.If the property is partially used in the regular course of the taxpayer’s trade or business while under construction, the value of the property is to be included in the property factor to the extent used.(4-6-23)

d.Property used in the regular course of the taxpayer’s trade or business is to remain in the property factor until it is permanently withdrawn by an identifiable event such as its sale, abandonment, or any event or circumstance that renders the property incapable of being used in the regular course of the taxpayer’s trade or

a.A taxpayer closed its manufacturing plant in State X and held the property for sale. The property remained vacant until its sale one (1) year later. The value of the manufacturing plant is included in the property factor until the plant is sold.(4-6-23)

b.Assume the same facts as in Subsection 465.02.a., except the property was rented until the plant was sold. The plant is included in the property factor until the plant is sold.(4-6-23)

IDAPA 35.01.01.466 (Reserved)

IDAPA 35.01.01.470 Property Factor: Consistency in Reporting (rule 470)

Year to Year Consistency. If a taxpayer departs from or modifies the method used for valuing property, or for excluding or including property in the property factor in prior year Idaho returns, the taxpayer is to disclose the nature and extent of all modifications in its current year return.(4-6-23)

02.State to State Consistency. If the returns or reports filed by a taxpayer with all states to which the taxpayer reports pursuant to Section 63-3027, Idaho Code; Article IV of the Multistate Tax Compact; or the Uniform Division of Income for Tax Purposes Act are not uniform in valuing property and in excluding or including property in the property factor, the taxpayer is to disclose the nature and extent of the variance in its current year Idaho return.

IDAPA 35.01.01.471 (Reserved)

IDAPA 35.01.01.475 Property Factor: Numerator (rule 475)

01.In General. The numerator of the property factor is to include the average value of the real and tangible personal property owned or rented by the taxpayer and used in Idaho during the taxable year in the regular course of the taxpayer’s trade or business.(4-6-23)

02.Property in Transit. Property of the taxpayer that is in transit between locations is to be considered to be at the destination for purposes of the property factor. If property in transit between a buyer and seller is included by a taxpayer in the denominator of its property factor, it is to be included in the numerator according to the state of destination.(4-6-23)

03.Mobile or Movable Property.(4-6-23)

a.The value of mobile or movable property such as construction equipment, trucks, or leased electronic equipment located within and without Idaho during the taxable year will be determined on the basis of total time and use in Idaho as a percentage of total time and use everywhere.(4-6-23)

b.An automobile assigned to a traveling employee is to be included in the numerator of the state to which the employee’s compensation is assigned for the payroll factor or in the numerator of the state in which the automobile is licensed.(4-6-23)

c.The value of aircraft used within and without Idaho during the taxable year will be determined by multiplying the value of the aircraft by the ratio of departures from locations in Idaho to total departures.(4-6-23)

IDAPA 35.01.01.476 (Reserved)

IDAPA 35.01.01.480 Property Factor: Valuation of Owned Property (rule 480)

Section 63-3027(16)(b), Idaho Code In General. Property owned by a taxpayer is to be valued at its original cost. As a general rule, original cost is deemed to be the basis of the property for federal income tax purposes, prior to any federal adjustments at the time of acquisition and adjusted by subsequent capital additions or improvements and partial disposition, by reason of sale, exchange, abandonment, etc. However, capitalized intangible drilling and development costs of producing property is to be included in the property factor whether or not they have been expensed for either federal or state tax purposes.(4-6-23)

a.A taxpayer acquired a factory building in Idaho at a cost of five hundred thousand dollars ($500,000). Eighteen (18) months later the taxpayer remodeled the building for a cost of one hundred thousand dollars ($100,000). The taxpayer files its return on the calendar year basis. The taxpayer claimed a depreciation deduction of twenty-two thousand dollars ($22,000) on its current year return. The value of the building included in the numerator and denominator of the property factor is six hundred thousand dollars ($600,000). The depreciation deduction is not taken into account in determining the value of the building for purposes of the factor.(4-6-23)

b.During the current taxable year, X Corporation merged into Y Corporation in a tax-free reorganization pursuant to the Internal Revenue Code. At the time of the merger, X Corporation owned a factory that it built five (5) years earlier at a cost of one million dollars ($1,000,000). X has been depreciating the factory at the rate of two percent (2%) per year. Its basis in X’s hands at the time of the merger is nine hundred thousand dollars ($900,000). Since Y acquired the property in a tax-free transaction, Y includes the property in its property factor at X’s original cost of one million dollars ($1,000,000).(4-6-23)

03.Unknown Original Cost. If the original cost of property cannot be determined, the property is included in the factor at its fair market value on the date it was acquired.(4-6-23)

04.Inventory. Inventory is to be included in the factor according to the valuation method used for federal income tax purposes.(4-6-23)

05.Gifts or Inheritance. Property acquired by gift or inheritance is to be included in the factor at its basis pursuant to the Internal Revenue Code.(4-6-23)

IDAPA 35.01.01.481 (Reserved)

IDAPA 35.01.01.485 Property Factor: Valuation of Rented Property (rule 485)

Section 63-3027(16)(b), Idaho Code In General. Property rented by the taxpayer is valued at eight (8) times its net annual rental rate.

The net annual rental rate is the annual rental rate paid by the taxpayer for the property, less the aggregate annual subrental rates paid by subtenants. Subrents are not deducted if they constitute apportionable income because the property that produces the subrents is used in the regular course of the taxpayer’s trade or business when it is producing the income. Accordingly, there is no reduction in its value. See Rules 560 and 565 of these rules for special rules when using the net annual rental rate produces a negative or clearly inaccurate value or when the taxpayer uses property at no charge or rents it at a nominal rental rate.(4-6-23)

02.Examples of Subrents.(4-6-23)

a.A taxpayer receives subrents from a bakery concession in a food market operated by the taxpayer.

Since the subrents are apportionable income, they are not deducted from rent paid by the taxpayer for the food market.(4-6-23)

b.A taxpayer rents a five (5) story office building primarily for use in its multistate business. It uses three (3) floors for its offices and subleases two (2) floors to various other businesses on a short-term basis because it anticipates it will need those two (2) floors for future expansion of its multistate business. The rental of all five (5) floors is integral to the operation of the taxpayer’s trade or business. Since the subrents are apportionable income, they are not deducted from the rent paid by the taxpayer.(4-6-23)

03.Annual Rental Rate. Annual rental rate is the amount paid as rent for property for a twelve (12) month period. If property is rented for less than a twelve (12) month period, the rent paid for the rental period constitutes the annual rental rate for the taxable year. However, if a taxpayer has rented property for a period of twelve (12) months or more and the current taxable year covers a period of less than twelve (12) months, the rent paid for the short taxable year is to be annualized. If the rental period is for less than twelve (12) months, the rent may not be annualized beyond its rental period. If the rental period is on a month-to-month basis, the rent may not be annualized.(4-6-23)

04.Examples of Annual Rental Rate.(4-6-23)

a.Taxpayer A, which ordinarily files its returns based on a calendar year, is merged into Taxpayer B on April 30. The net rent paid pursuant to a lease with five (5) years remaining is two thousand five hundred dollars ($2,500) a month. The rent for the short taxable year January 1 to April 30 is ten thousand dollars ($10,000). After the rent is annualized the net rent is thirty thousand dollars ($30,000) or ($2,500 x 12).(4-6-23)

b.Assume the same facts as in Paragraph 485.04.a., of this rule except the lease would have terminated on August 31. In this example, the annualized net rent is twenty thousand dollars ($20,000) or ($2,500 x 8).(4-6-23)

05.Annual Rent. Annual rent is the sum of money or other consideration payable, directly or indirectly, by the taxpayer or for the taxpayer’s benefit for the use of the property and includes:(4-6-23)

a.Any amount payable for the use of real or tangible personal property whether the amount is a fixed sum of money or a percentage of sales, profits, or otherwise.(4-6-23) b.

Any amount payable as additional rent or in lieu of rents, such as interest, taxes, insurance, repairs or any other items required to be paid by the terms of the lease or other arrangement, not including amounts paid as service charges, such as utilities, janitor services, etc. If a payment includes rent and other charges not separately stated, the amount of the rent is to be determined by considering the relative values of the rent and the other items.

06.Examples of Annual Rent.(4-6-23)

a.Pursuant to the terms of a lease, a taxpayer pays a lessor one thousand dollars ($1,000) per month as a base rental and at the end of the year pays the lessor one percent (1%) of its gross sales of four hundred thousand dollars ($400,000). The annual rent is sixteen thousand dollars ($16,000) or ($12,000 + (1% x $400,000)).(4-6-23)

b.Pursuant to the terms of a lease, a taxpayer pays a lessor twelve thousand dollars ($12,000) a year for rent, plus taxes of two thousand dollars ($2,000) and mortgage interest of one thousand dollars ($1,000). The annual rent is fifteen thousand dollars ($15,000).(4-6-23)

c.A taxpayer stores part of its inventory in a public warehouse. The total charge for the year is one thousand dollars ($1,000), of which seven hundred dollars ($700) is for storage space and three hundred dollars ($300) is for inventory insurance, handling and shipping charges, and C.O.D. collections. The annual rent is seven hundred dollars ($700).(4-6-23)

07.Exclusions. Annual rent does not include any of the following:(4-6-23)

a.Incidental day-to-day expenses such as hotel or motel accommodations, daily rental of automobiles, etc.(4-6-23)

b.Royalties based on extraction of natural resources, whether represented by delivery or purchase.

For this purpose, a royalty includes any consideration conveyed or credited to a holder of an interest in property that constitutes a sharing of current or future production of natural resources from the property, whether designated as a royalty, advance royalty, rental, or otherwise.(4-6-23)

08.Leasehold Improvements. Leasehold improvements is to be treated as property owned by the lessee regardless of whether the lessee is entitled to remove the improvements or they revert to the lessor when the lease expires. The original cost of leasehold improvements is to be included in the lessee’s factor.(4-6-23)

09.Safe Harbor Lease. Property subject to a safe harbor lease will be reported in the factor of the actual user of the property at original acquisition cost.(4-6-23)

IDAPA 35.01.01.486 (Reserved)

IDAPA 35.01.01.490 Property Factor: Averaging Property Values (rule 490)

Section 63-3027(16)(c), Idaho Code

01.In General. The average value of property owned by a taxpayer is to be determined by averaging the values at the beginning and end of the taxable year.(4-6-23)

02.Monthly Averaging. The Tax Commission may require or allow averaging by monthly values if that method of averaging is required to properly reflect the average value of the taxpayer’s property for the taxable year. Averaging by monthly values generally applies if there are substantial fluctuations in the property values during the taxable year or if property is acquired or disposed of during the taxable year.(4-6-23)

03.Rented Property. Rented property is averaged automatically by determining the net annual rental rate of the property as set forth in Rule 485 of these rules.(4-6-23)

IDAPA 35.01.01.491 (Reserved)

IDAPA 35.01.01.500 Payroll Factor: in General (rule 500)

Section 63-3027(16)(d), Idaho Code

01.In General. The payroll factor of the apportionment formula for each trade or business of the taxpayer includes the total amount paid for compensation during the taxable year by the taxpayer in the regular course of its trade or business.(4-6-23)

02.Compensation. For purposes of the payroll factor, compensation means wages, salaries, commissions and any other form of remuneration paid to employees for personal services.(4-6-23)

a.Compensation includes the value of board, rent, housing, lodging, and other benefits or services the taxpayer furnished to employees in return for personal services if the amounts constitute income to the recipient pursuant to the Internal Revenue Code.(4-6-23)

b.If employees are not subject to the Internal Revenue Code, for example, those employed in foreign countries, the determination of whether the benefits or services would constitute income to the employees is made as if the employees were subject to the Internal Revenue Code.(4-6-23)

c.If wages paid to employees are capitalized into the cost of an asset that is used in the regular course of the taxpayer’s trade or business, these wages are included in the payroll factor.(4-6-23)

03.Amount Paid. The total amount paid to employees is determined by the taxpayer’s accounting method. If the taxpayer uses the accrual method of accounting, all compensation properly accrued is deemed to have been paid. At the election of the taxpayer, compensation paid to employees may be included in the payroll factor by using the cash method if the taxpayer is required to use that method to report compensation for unemployment insurance purposes.(4-6-23)

04.Employee. For purposes of the payroll factor, employee means any officer of a corporation, or any individual who, pursuant to the usual common-law rules applicable in determining the employer-employee relationship, has the status of an employee. Generally, a person is considered an employee if he is included by the taxpayer as an employee for purposes of the payroll taxes imposed by the Federal Insurance Contributions Act (FICA); except that, since certain individuals are included within the term employees in the FICA who would not be employees pursuant to the usual common-law rules, it may be established that a person who is included as an employee for purposes of the FICA is not an employee for purposes of this rule.(4-6-23)

05.Exclusions. The following are excluded from the payroll factor:(4-6-23)

a.Compensation paid to an employee for services connected with the production of nonapportionable income;(4-6-23)

b.Payments to an independent contractor or a person not properly classifiable as an employee.

06.Year to Year Consistency. If a taxpayer departs from or modifies the method used for treating compensation paid in prior year Idaho returns, the taxpayer is to disclose the nature and extent of all modifications in its current year return.(4-6-23)

07.State to State Consistency. If the returns or reports filed by a taxpayer with all states to which the taxpayer reports pursuant to Section 63-3027, Idaho Code; Article IV of the Multistate Tax Compact; or the Uniform Division of Income for Tax Purposes Act are not uniform in treating compensation paid, the taxpayer is to disclose the nature and extent of the variance in its current year Idaho return.(4-6-23)

IDAPA 35.01.01.501 (Reserved)

IDAPA 35.01.01.505 Payroll Factor: Denominator (rule 505)

Section 63-3027(16)(d), Idaho Code

01.In General. The denominator of the payroll factor is the total compensation paid everywhere during the taxable year. Accordingly, compensation paid to employees whose services are performed entirely in a state where the taxpayer is immune from taxation, for example, by Public Law 86-272, is included in the denominator of the payroll factor. The denominator may not exceed the sum of all numerators.(4-6-23)

02.Example. A taxpayer has employees in States A, B, and C. However, in State C the taxpayer is immune from taxation by Public Law 86-272. The compensation paid to employees for services performed in State C is assigned to that state. This compensation is included in the denominator even though the taxpayer is not taxable in State C.(4-6-23)

IDAPA 35.01.01.506 (Reserved)

IDAPA 35.01.01.510 Payroll Factor: Numerator (rule 510)

Section 63-3027(16)(d), Idaho Code. The numerator of the pay roll factor is the total amount the taxpayer paid for compensation in Idaho during the taxable year. The tests in Section 63-3027(16)(e), Idaho Code, apply in determining whether compensation is paid in Idaho. It will be presumed that the total wages reported by the taxpayer to Idaho for unemployment insurance purposes constitute compensation paid in Idaho except compensation excluded by Rules 500 through 524 of these rules. The presumption may be overcome by satisfactory evidence that an employee’s compensation is not properly reportable to Idaho for unemployment insurance purposes.(4-6-23)

IDAPA 35.01.01.511 (Reserved)

IDAPA 35.01.01.515 Payroll Factor: Compensation Paid in Idaho (rule 515)

Section 63-3027(16)(e), Idaho Code In General. Compensation is paid in Idaho if one of the tests in Section 63-3027(16)(e), Idaho Code, is met.(4-6-23)

02.Definitions. The following definitions are to be used for purposes of the payroll factor:(4-6-23)

a.Incidental means a service that is temporary or transitory in nature, or that is rendered in connection with an isolated transaction.(4-6-23)

b.Base of operations means the place of a more or less permanent nature where the employee starts his work and where he customarily returns to receive instructions from the taxpayer or communications from his customers or other persons, or to replenish stock or other materials, repair equipment, or perform any other functions necessary to his trade or profession.(4-6-23)

c.Place from which the service is directed or controlled means the place where the power to direct or control is exercised by the taxpayer.(4-6-23)

IDAPA 35.01.01.516 (Reserved)

IDAPA 35.01.01.525 Sales Factor: in General (rule 525)

Section 63-3027(10)(a), Idaho Code In General. Sales means all gross receipts of a taxpayer not allocated as nonapportionable income.

The sales factor for each trade or business of the taxpayer includes all gross receipts derived by the taxpayer from transactions and activity in the regular course of that trade or business or otherwise required to be included as apportionable income.(4-6-23)

a.If a taxpayer manufactures and sells or purchases and resells goods or products, sales includes all gross receipts from sales of the goods or products held primarily for sale to customers in the ordinary course of the taxpayer’s trade or business. Sales also includes gross receipts from the sale of other property that would be properly included in the taxpayer’s inventory if on hand at the close of the taxable year. Gross receipts means gross sales, less returns and allowances and includes all interest income, service charges, carrying charges, or time-price differential charges incidental to the sales. Federal and state excise taxes, including sales taxes, are included in gross receipts if these taxes are passed on to the buyer or included in the product’s selling price.(4-6-23)

b.In the case of cost plus fixed fee contracts, such as the operation of a government-owned plant for a fee, sales includes the entire reimbursed cost plus the fee.(4-6-23)

c.If a taxpayer provides services, such as operating an advertising agency, or performing equipment service contracts or research and development contracts, sales includes the gross receipts from performing the service, including fees, commissions, and similar items.(4-6-23)

d.If a taxpayer rents real or tangible property, sales includes the gross receipts from the renting, leasing, or licensing the use of the property.(4-6-23)

e.If a taxpayer sells, assigns, or licenses intangible personal property, such as patents and copyrights, sales includes the gross receipts from these transactions.(4-6-23)

f.If a taxpayer derives receipts from selling equipment used in its business, the receipts constitute sales. For example, a trucking company owns a fleet of trucks and sells its trucks according to a regular replacement program. The gross receipts from the sale of the trucks are included in the sales factor.(4-6-23)

g.If a taxpayer derives receipts from foreign source dividends that are apportionable income, the receipts constitute sales. No other apportionment factor relief is permitted to include this dividend income. Section 78, Internal Revenue Code, foreign dividend gross-up is excluded from sales.(4-6-23)

03.Disregarding Gross Receipts. In some cases, certain gross receipts should be disregarded in determining the sales factor so that the apportionment formula operates fairly to apportion the income of the taxpayer’s trade or business to Idaho. See Rule 570 of these rules.(4-6-23)

04.Year to Year Consistency. If a taxpayer departs from or modifies the basis used for excluding or including gross receipts in the sales factor in prior year Idaho returns, the taxpayer is to disclose the nature and extent of all modifications in its current year return.(4-6-23)

05.State to State Consistency. If the returns or reports filed by a taxpayer with all states to which the taxpayer reports pursuant to Section 63-3027, Idaho Code; Article IV of the Multistate Tax Compact; or the Uniform Division of Income for Tax Purposes Act are not uniform in including or excluding gross receipts, the taxpayer is to disclose the nature and extent of the variance in its current year Idaho return.(4-6-23)

IDAPA 35.01.01.526 (Reserved)

IDAPA 35.01.01.530 Sales Factor: Denominator (rule 530)

Section 63-3027(10)(a), Idaho Code.

The denominator of the sales factor includes the total gross receipts derived by the taxpayer from transactions and activity in the regular course of its trade or business or otherwise required to be included as apportionable income, except receipts excluded by Rules 525 through 559 and Rule 570 of these rules.

The denominator may not exceed the sum of all the numerators.(4-6-23)

IDAPA 35.01.01.531 (Reserved)

IDAPA 35.01.01.535 Sales Factor: Numerator (rule 535)

Section 63-3027(10)(a), Idaho Code. The numerator of the sales factor includes gross receipts attributable to Idaho and derived by the taxpayer from transactions and activity in the regular course of its trade or business or otherwise required to be included as apportionable income. All interest income, service charges, carrying charges, or time-price differential charges incidental to gross receipts are included regardless of where the accounting records are maintained or the location of the contract or other evidence of indebtedness.(4-6-23)

IDAPA 35.01.01.536 (Reserved)

IDAPA 35.01.01.540 Sales Factor: Sales of Tangible Personal Property in Idaho (rule 540)

Section 63-3027(12), Idaho Code

01.Gross Receipts. Gross receipts from sales of tangible personal property, except sales to the United States Government as discussed in Rule 545 of these rules, are in Idaho if:(4-6-23)

a.The property is delivered or shipped to a purchaser in Idaho regardless of the f.o.b. point or other conditions of sale; or(4-6-23)

b.The property is shipped from an office, store, warehouse, factory, or other place of storage in Idaho and the taxpayer is not taxable in the state of the purchaser.(4-6-23)

02.Destination Sales.(4-6-23)

a.Property is deemed to be delivered or shipped to a purchaser in Idaho if the recipient is in Idaho even though the property is ordered from outside Idaho. Example: A taxpayer, with inventory in State A, sold one hundred thousand dollars ($100,000) of its products to a purchaser with branch stores in several states including Idaho. The order for the purchase was placed by the purchaser’s central purchasing department in State B. Twentyfive thousand dollars ($25,000) of the purchase order was shipped directly to purchaser’s branch store in Idaho. The branch store in Idaho is the purchaser in Idaho with respect to twenty-five thousand dollars ($25,000) of the taxpayer’s sales.(4-6-23)

b.Property is delivered or shipped to a purchaser in Idaho if the shipment terminates in Idaho, even if the property is subsequently transferred to another state by the purchaser. Example: A taxpayer makes a sale to a purchaser who maintains a central warehouse in Idaho where all merchandise purchases are received. The purchaser reships the goods to its branch stores in other states for sale. All of the taxpayer’s products shipped to the purchaser’s warehouse in Idaho constitute property delivered or shipped to a purchaser in Idaho.(4-6-23)

03.Purchaser. The term purchaser in Idaho includes the ultimate recipient of the property if at the request of the purchaser the taxpayer in Idaho delivers to or has the property shipped to the ultimate recipient in Idaho. Example: A taxpayer in Idaho sold merchandise to a purchaser in State A. The taxpayer directed the manufacturer or supplier of the merchandise in State B to ship the merchandise to the purchaser’s customer in Idaho according to the purchaser’s instructions. The sale by the taxpayer is in Idaho.(4-6-23)

04.Diverted Shipment. If a seller ships property from the state of origin to a consignee in another state, and the property is diverted while en route to a purchaser in Idaho, the sales are in Idaho. Example: The taxpayer, a produce grower in State A, begins shipping perishable produce to the purchaser’s place of business in State B. While en route the produce is diverted to the purchaser’s place of business in Idaho where the taxpayer is subject to tax. The sale by the taxpayer is in Idaho.(4-6-23)

05.Throwback Sales. If a taxpayer is not taxable in the state of the purchaser, the sale is attributed to Idaho if the property is shipped from an office, store, warehouse, factory, or other place of storage in Idaho. Example:

A taxpayer has its head office and factory in State A. It has a branch office and inventory in Idaho. The taxpayer’s only activity in State B is the solicitation of orders by a resident salesman. All orders by the State B salesman are sent to the branch office in Idaho for approval and are filled by shipment from the inventory in Idaho. Since the taxpayer is immune from tax in State B by Public Law 86-272, all sales of merchandise to purchasers in State B are attributed to Idaho, the state from which the merchandise was shipped.(4-6-23)

06.Third-Party Throwback Sales. If a taxpayer’s salesman operating from an office in Idaho makes a sale to a purchaser in another state where the taxpayer is not taxable and the property is shipped directly by a third party to the purchaser, the following rules apply:(4-6-23)

a.If the taxpayer is taxable in the state from which the third-party ships the property, the sale is in that state.(4-6-23)

b.If the taxpayer is not taxable in the state from which the property is shipped, the sale is in Idaho.

c.Example. A taxpayer in Idaho sold merchandise to a purchaser in State A. The taxpayer is not taxable in State A. On direction of the taxpayer, the merchandise was shipped directly to the purchaser by the manufacturer in State B. If the taxpayer is taxable in State B, the sale is in State B. If the taxpayer is not taxable in State B, the sale is in Idaho.(4-6-23)

IDAPA 35.01.01.541 (Reserved)

IDAPA 35.01.01.545 Sales Factor: Sales of Tangible Personal Property to the United States

GOVERNMENT IN IDAHO (RULE 545).

Section 63-3027(12), Idaho Code In General. Gross receipts from sales of tangible personal property to the United States Government are in Idaho if the property is shipped from an office, store, warehouse, factory, or other place of storage in Idaho. For purposes of this rule, only sales for which the United States Government makes direct payment to the seller pursuant to the terms of a contract constitute sales to the United States Government. Generally, sales by a subcontractor to the prime contractor, the party to the contract with the United States Government, are not sales to the United States Government.(4-6-23)

a.A taxpayer contracts with the General Services Administration to deliver a truck that was paid for by the United States Government. The sale is a sale to the United States Government.(4-6-23)

b.A taxpayer as a subcontractor to a prime contractor with the National Aeronautics and Space Administration contracts to build a rocket component for one million dollars ($1,000,000). The sale by the subcontractor to the prime contractor is not a sale to the United States Government.(4-6-23)

IDAPA 35.01.01.546 Sales Factor: Sales Other Than Sales of

TANGIBLE PERSONAL PROPERTY IN

THIS STATE – GENERAL RULES (RULE 546).

Section 63-3027(13), Idaho Code Definitions. For the purposes of this Rules 546 through 551, these terms have the following meanings:(4-6-23)

a.Billing address. The location indicated in the books and records of the taxpayer as the primary mailing address relating to a customer’s account as of the time of the transaction as kept in good faith in the normal course of business and not for tax avoidance purposes.(4-6-23)

b.Business customer. A customer that is a business operating in any form, including a sole proprietorship. Sales to a non-profit organization, to a trust, to the U.S. Government, to a foreign, state or local government, or to an agency or instrumentality of that government are treated as sales to a business customer and must be assigned consistent with the rules for those sales.(4-6-23)

c.Individual customer. A customer that is not a business customer.(4-6-23)

d.Intangible property. Generally means property that is not physical or whose representation by physical means is merely incidental and includes, without limitation, copyrights; patents; trademarks; trade names; brand names; franchises; licenses; trade secrets; trade dress; information; know-how; methods; programs; procedures; systems; formulae; processes; technical data; designs; licenses; literary, musical, or artistic compositions; information; ideas; contract rights including broadcast rights; agreements not to compete; goodwill and going concern value; securities; and, except as otherwise provided in these rules, computer software.(4-6-23)

e.Place of order. The physical location from which a customer places an order for a sale other than a sale of tangible personal property from a taxpayer, resulting in a contract with the taxpayer.(4-6-23)

f.Population. The most recent population data maintained by the U.S. Census Bureau for the year in question as of the close of the taxable period.(4-6-23)

g.Related Party.(4-6-23)

i.A stockholder who is an individual, or a member of the stockholder's family set forth in section 318 of the Internal Revenue Code if the stockholder and the members of the stockholder's family own, directly, indirectly, beneficially or constructively, in the aggregate, at least fifty percent (50%) of the value of the taxpayer's outstanding stock;(4-6-23)

ii.A stockholder, or a stockholder's partnership, limited liability company, estate, trust or corporation, if the stockholder and the stockholder's partnerships, limited liability companies, estates, trusts and corporations own directly, indirectly, beneficially or constructively, in the aggregate, at least fifty percent (50%) of the value of the taxpayer's outstanding stock; or(4-6-23)

iii.A corporation, or a party related to the corporation in a manner that would require an attribution of stock from the corporation to the party or from the party to the corporation under the attribution rules of the Internal Revenue Code if the taxpayer owns, directly, indirectly, beneficially or constructively, at least fifty percent (50%) of the value of the corporation's outstanding stock. The attribution rules of the Internal Revenue Code shall apply for purposes of determining whether the ownership requirements of this definition have been met.(4-6-23)

h.State where a contract of sale is principally managed by the customer. The primary location at which an employee or other representative of a customer serves as the primary contact person for the taxpayer with respect to the day-to-day execution and performance of a contract entered into by the taxpayer with the customer.

02.General Principles of Application – Contemporaneous Records.(4-6-23)

a.A taxpayer shall apply the principles set forth in Rules 546 through 551 based on objective criteria and shall consider all sources of information reasonably available to the taxpayer at the time of its tax filing including the taxpayer’s books and records kept in the normal course of the taxpayer’s business. A taxpayer shall determine its method of assigning receipts in good faith and apply it consistently with respect to similar transactions and year to year. A taxpayer shall retain contemporaneous records that explain the determination and application of its method of assigning its receipts, including its underlying assumptions, and shall provide those records to the Tax Commission upon request.(4-6-23)

b.Rules 546 through 551 provide various assignment rules that apply sequentially in a hierarchy. For each sale to which a hierarchical rule applies, a taxpayer must make a reasonable effort to apply the primary rule applicable to the sale before seeking to apply the next rule in the hierarchy (and must continue to do so with each succeeding rule in the hierarchy, where applicable). For example, in some cases, the applicable rule first requires a taxpayer to determine the state or states of assignment, and if the taxpayer cannot do so, the rule requires the taxpayer to reasonably approximate the state or states. In these cases, the taxpayer must attempt to determine the state or states of assignment (i.e., apply the primary rule in the hierarchy) in good faith and with reasonable effort before it may reasonably approximate the state or states.(4-6-23) c.

A taxpayer’s method of assigning its receipts, including the use of a method of approximation, where applicable, must reflect an attempt to obtain the most accurate assignment of receipts consistent with the standards set forth in Rules 546 through 551, rather than an attempt to lower the taxpayer’s tax liability. A method of assignment that is reasonable for one taxpayer may not necessarily be reasonable for another taxpayer, depending upon the applicable facts.(4-6-23)

03.Rules of Reasonable Approximation.(4-6-23)

a.In General. In general, Rules 546 through 551 establish uniform provisions for determining whether and to what extent the market for a sale other than the sale of tangible personal property is in this state. These rules also set forth provisions of reasonable approximation, which apply if the state or states of assignment cannot be determined. In some instances, the reasonable approximation must be made in accordance with specific provisions of approximation prescribed in these rules. In other cases, the applicable provision in these rules permits a taxpayer to reasonably approximate the state or states of assignment, using a method that reflects an effort to approximate the results that would be obtained under the applicable provisions or standards set forth in these rules.(4-6-23)

b.Approximation Based Upon Known Sales. In an instance where, applying the applicable provisions set forth in Rule 548 (Sale of a Service), a taxpayer can ascertain the state or states of assignment of a substantial portion of its receipts from sales of substantially similar services (“assigned receipts”), but not all of those sales, and the taxpayer reasonably believes, based on all available information, that the geographic distribution of some or all of the remainder of those sales generally tracks that of the assigned receipts, it shall include receipts from those sales which it believes tracks the geographic distribution of the assigned receipts in its sales factor in the same proportion as its assigned receipts. This provision also applies in the context of licenses and sales of intangible property where the substance of the transaction resembles a sale of goods or services. See Rule 549.05 and 550.01.c.(4-6-23)

c.Related-Party Transactions – Information Imputed from Customer to Taxpayer. Where a taxpayer has receipts subject to these rules from transactions with a related-party customer, information that the customer has that is relevant to the sourcing of receipts from these transactions is imputed to the taxpayer, unless the taxpayer shows that imputing such knowledge is unreasonable.(4-6-23)

IDAPA 35.01.01.547 Sales Factor: Rental, Lease, or License of Tangible Personal Property

(RULE 547).

Section 63-3027(13)(b), Idaho Code. In the case of a rental, l ease or license of tangible personal property, the receipts from the sale are in this state if and to the extent that the property is in this state. If property is mobile property that is located both within and without this state during the period of the lease or other contract, the receipts assigned to this state are the receipts from the contract period multiplied by the fraction computed under Rule 475.03 (as adjusted when necessary to reflect differences between usage during the contract period and usage during the taxable year).

IDAPA 35.01.01.548 Sales Factor: Sale of a Service (rule 548)

Section 63-3027(13)(c), Idaho Code General Rule. The receipts from a sale of a service are in this state if and to the extent that the service is delivered to a location in this state. In general, the term “delivered to a location” refers to the location of the taxpayer’s market for the service, which may not be the location of the taxpayer’s employees or property. The rules to determine the location of the delivery of a service in the context of several specific types of service transactions are set forth below in Subsections 548.02 through 548.04.(4-6-23)

02.In-Person Services.(4-6-23)

a.In General. Except as otherwise provided in this Subsection 548.02, in-person services are services that are physically provided in person by the taxpayer, where the customer or the customer’s real or tangible property upon which the services are performed is in the same location as the service provider at the time the services are performed. This Rule 548 includes situations where the services are provided on behalf of the taxpayer by a thirdparty contractor. Examples of in-person services include, without limitation, warranty and repair services; cleaning services; plumbing services; carpentry; construction contractor services; pest control; landscape services; medical and dental services, including medical testing, x-rays and mental health care and treatment; childcare; hair cutting and salon services; live entertainment and athletic performances; and in-person training or lessons. In-person services include services within the description above that are performed at (1) a location that is owned or operated by the service provider or (2) a location of the customer, including the location of the customer’s real or tangible personal property. Various professional services, including legal, accounting, financial and consulting services, and other similar services as described in Subsection 548.04 of this rule, although they may involve some amount of in-person contact, are not treated as in-person services within the meaning of this Subsection 548.02.(4-6-23)

b.Assignment of Receipts, Rule of Determination. Except as otherwise provided in this paragraph (b.), if the service provided by the taxpayer is an in-person service, the service is delivered to the location where the service is received. Therefore, the receipts from a sale are in this state if and to the extent the customer receives the in-person service in this state. In assigning its receipts from sales of in-person services, a taxpayer must first attempt to determine the location where a service is received, as follows:(4-6-23)

i.If the service is performed with respect to the body of an individual customer in this state (e.g. hair cutting or x-ray services) or in the physical presence of the customer in this state (e.g. live entertainment or athletic performances), the service is received in this state.(4-6-23)

ii.If the service is performed with respect to the customer’s real estate in this state or if the service is performed with respect to the customer’s tangible personal property at the customer’s residence or in the customer’s possession in this state, the service is received in this state.(4-6-23)

iii.If the service is performed with respect to the customer’s tangible personal property and the tangible personal property is to be shipped or delivered to the customer, whether the service is performed within or outside this state, the service is received in this state if the property is shipped or delivered to the customer in this state.(4-6-23)

c.Rule of Reasonable Approximation. In an instance in which the state or states where a service is actually received cannot be determined, but the taxpayer has sufficient information regarding the place of receipt from which it can reasonably approximate the state or states where the service is received, the taxpayer shall reasonably approximate such state or states.(4-6-23)

03.Services Delivered to the Customer or on Behalf of the Customer, or Delivered Electronically Through the Customer.(4-6-23)

a.In General. If the service provided by the taxpayer is not an in-person service within the meaning of Subsection 548.02 of this rule or a professional service within the meaning of Subsection 548.04 of this rule), and the service is delivered to or on behalf of the customer, or delivered electronically through the customer, the receipts from a sale are in this state if and to the extent that the service is delivered in this state. For purposes of this Subsection 548.03, a service that is delivered “to” a customer is a service in which the customer and not a third party is the recipient of the service. A service that is delivered “on behalf of” a customer is one in which a customer contracts for a service but one or more third parties, rather than the customer, is the recipient of the service, such as fulfillment services, or the direct or indirect delivery of advertising to the customer’s intended audience (see Subparagraph 548.03.b.i. below and the Example under 548.03.b.i.(3)(d) below). A service can be delivered to or on behalf of a customer by physical means or through electronic transmission. A service that is delivered electronically “through” a customer is a service that is delivered electronically to a customer for purposes of resale and subsequent electronic delivery in substantially identical form to an end user or other third-party recipient.(4-6-23)

b.Assignment of Receipts. The assignment of receipts to a state or states in the instance of a sale of a service that is delivered to the customer or on behalf of the customer, or delivered electronically through the customer, depends upon the method of delivery of the service and the nature of the customer. Separate rules of assignment apply to services delivered by physical means and services delivered by electronic transmission. (For purposes of this Subsection 548.03, a service delivered by an electronic transmission is not a delivery by a physical means). If a rule of assignment set forth in this Subsection 548.03 depends on whether the customer is an individual or a business customer, and the taxpayer acting in good faith cannot reasonably determine whether the customer is an individual or business customer, the taxpayer shall treat the customer as a business customer.(4-6-23)

i.Delivery to or on Behalf of a Customer by Physical Means Whether to an Individual or Business Customer. Services delivered to a customer or on behalf of a customer through a physical means include, for example, product delivery services where property is delivered to the customer or to a third party on behalf of the customer; the delivery of brochures, fliers or other direct mail services; the delivery of advertising or advertisingrelated services to the customer’s intended audience in the form of a physical medium; and the sale of custom software (e.g., where software is developed for a specific customer in a case where the transaction is properly treated as a service transaction for purposes of corporate taxation) where the taxpayer installs the custom software at the customer’s site. The rules in this Subparagraph 548.03.b.i. apply whether the taxpayer’s customer is an individual customer or a business customer.(4-6-23)

(1)Rule of Determination. In assigning the receipts from a sale of a service delivered to a customer or on behalf of a customer through a physical means, a taxpayer must first attempt to determine the state or states where the service is delivered. If the taxpayer is able to determine the state or states where the service is delivered, it shall assign the receipts to that state or states.(4-6-23)

(2)Rule of Reasonable Approximation. If the taxpayer cannot determine the state or states where the service is actually delivered, but has sufficient information regarding the place of delivery from which it can reasonably approximate the state or states where the service is delivered, it shall reasonably approximate the state or states.(4-6-23)

ii.Delivery to a Customer by Electronic Transmission. Services delivered by electronic transmission include, without limitation, services that are transmitted through the means of wire, lines, cable, fiber optics, electronic signals, satellite transmission, audio or radio waves, or other similar means, whether or not the service provider owns, leases or otherwise controls the transmission equipment. In the case of the delivery of a service by electronic transmission to a customer, the following provisions apply.(4-6-23)

(1)Services Delivered By Electronic Transmission to an Individual Customer.(4-6-23)

(a)Rule of Determination. In the case of the delivery of a service to an individual customer by electronic transmission, the service is delivered in this state if and to the extent that the taxpayer’s customer receives the service in this state. If the taxpayer can determine the state or states where the service is received, it shall assign the receipts from that sale to that state or states.(4-6-23)

(b)Rules of Reasonable Approximation. If the taxpayer cannot determine the state or states where the customer actually receives the service, but has sufficient information regarding the place of receipt from which it can reasonably approximate the state or states where the service is received, it shall reasonably approximate the state or states. If a taxpayer does not have sufficient information from which it can determine or reasonably approximate the state or states in which the service is received, it shall reasonably approximate the state or states using the customer’s billing address.(4-6-23)

(2)Services Delivered By Electronic Transmission to a Business Customer.(4-6-23)

(a)Rule of Determination. In the case of the delivery of a service to a business customer by electronic transmission, the service is delivered in this state if and to the extent that the taxpayer’s customer receives the service in this state. If the taxpayer can determine the state or states where the service is received, it shall assign the receipts from that sale to the state or states. For purposes of this subpart (548.03.b.ii.(2), it is intended that the state or states where the service is received reflect the location at which the service is directly used by the employees or designees of the customer.(4-6-23)

(b)Rule of Reasonable Approximation. If the taxpayer cannot determine the state or states where the customer actually receives the service, but has sufficient information regarding the place of receipt from which it can reasonably approximate the state or states where the service is received, it shall reasonably approximate the state or states.(4-6-23)

(c)Secondary Rule of Reasonable Approximation. In the case of the delivery of a service to a business customer by electronic transmission where a taxpayer does not have sufficient information from which it can determine or reasonably approximate the state or states in which the service is received, the taxpayer shall reasonably approximate the state or states as set forth in Rules 546 through 551. In these cases, unless the taxpayer can apply the safe harb or set forth in Subsection 548.03.b.ii.(2)(d) below, the taxpayer shall reasonably approximate the state or states in which the service is received as follows: first, by assigning the receipts from the sale to the state where the contract of sale is principally managed by the customer; second, if the state where the customer principally manages the contract is not reasonably determinable, by assigning the receipts from the sale to the customer’s place of order; and third, if the customer’s place of order is not reasonably determinable, by assigning the receipts from the sale using the customer’s billing address; provided, however, if the taxpayer derives more than five percent (5%) of its receipts from sales of services from any single customer, the taxpayer is required to identify the state in which the contract of sale is principally managed by that customer.(4-6-23)

(d)Safe Harbor. In the case of the delivery of a service to a business customer by electronic transmission a taxpayer may not be able to determine, or reasonably approximate under Subsection 548.03.b.ii.(2)(b) above, the state or states in which the service is received. In these cases, the taxpayer may, in lieu of the rule stated at Subsection 548.03.b.ii.(2)(c) above, apply the safe harbor stated in this subpart. Under this safe harbor, a taxpayer may assign its receipts from sales to a particular customer based upon the customer’s billing address in a taxable year in which the taxpayer (1) engages in substantially similar service transactions with more than two hundred fifty (250) customers, whether business or individual, and (2) does not derive more than five percent (5%) of its receipts from sales of all services from that customer. This safe harbor applies only for purposes of services delivered by electronic transmission to a business customer, and not otherwise.(4-6-23)

(e)Related Party Transactions. In the case of a sale of a service by electronic transmission to a business customer that is a related party, the taxpayer may not use the secondary rule of reasonable approximation in Subsection 548.03.b.ii.(2)(c) above, but may use the rule of reasonable approximation in Subsection 548.03.b.ii.(2)(b) above, and the safe harbor in Subsection 548.03.b.ii.(2)(d) above, provided that the Tax Commission may aggregate sales to related parties in determining whether the sales exceed five percent (5%) of receipts from sales of all services under that safe harbor provision if necessary or appropriate to prevent distortion.

iii.Services Delivered Electronically Through or on Behalf of an Individual or Business Customer. A service delivered electronically “on behalf of” the customer is one in which a customer contracts for a service to be delivered electronically but one or more third parties, rather than the customer, is the recipient of the service, such as the direct or indirect delivery of advertising on behalf of a customer to the customer’s intended audience. A service delivered electronically “through” a customer to third-party recipients is a service that is delivered electronically to a customer for purposes of resale and subsequent electronic delivery in substantially identical form to end users or other third-party recipients.(4-6-23)

(1)Rule of Determination. In the case of the delivery of a service by electronic transmission, where the service is delivered electronically to end users or other third-party recipients through or on behalf of the customer, the service is delivered in this state if and to the extent that the end users or other third-party recipients are in this state.

For example, in the case of the direct or indirect delivery of advertising on behalf of a customer to the customer’s intended audience by electronic means, the service is delivered in this state to the extent that the audience for the advertising is in this state. In the case of the delivery of a service to a customer that acts as an intermediary in reselling the service in substantially identical form to third-party recipients, the service is delivered in this state to the extent that the end users or other third-party recipients receive the services in this state. The rules in this part (548.03.b.iii.(1)) apply whether the taxpayer’s customer is an individual customer or a business customer and whether the end users or other third-party recipients to which the services are delivered through or on behalf of the customer are individuals or businesses.(4-6-23)

(2)Rule of Reasonable Approximation. If the taxpayer cannot determine the state or states where the services are actually delivered to the end users or other third-party recipients either through or on behalf of the customer, but has sufficient information regarding the place of delivery from which it can reasonably approximate the state or states where the services are delivered, it shall reasonably approximate the state or states.(4-6-23)

(3)Select Secondary Rules of Reasonab le Approximation.(4-6-23)

(a)If a taxpayer’s service is the direct or indirect electronic delivery of advertising on behalf of its customer to the customer’s intended audience, and if the taxpayer lacks sufficient information regarding the location of the audience from which it can determine or reasonably approximate that location, the taxpayer shall reasonably approximate the audience in a state for the advertising using the following secondary rules of reasonable approximation. If a taxpayer is delivering advertising directly or indirectly to a known list of subscribers, the taxpayer shall reasonably approximate the audience for advertising in a state using a percentage that reflects the ratio of the state’s subscribers in the specific geographic area in which the advertising is delivered relative to the total subscribers in that area. For a taxpayer with less information about its audience, the taxpayer shall reasonably approximate the audience in a state using the percentage that reflects the ratio of the state’s population in the specific geographic area in which the advertising is delivered relative to the total population in that area.(4-6-23)

(b)If a taxpayer’s service is the delivery of a service to a customer that then acts as the taxpayer’s intermediary in reselling that service to end users or other third party recipients, if the taxpayer lacks sufficient information regarding the location of the end users or other third party recipients from which it can determine or reasonably approximate that location, the taxpayer shall reasonably approximate the extent to which the service is received in a state by using the percentage that reflects the ratio of the state’s population in the specific geographic area in which the taxpayer’s intermediary resells the services, relative to the total population in that area.(4-6-23)

(c)When using the secondary reasonable approximation methods provided above, the relevant specific geographic area [of delivery] include only the areas where the service was substantially and materially delivered or resold. Unless the taxpayer demonstrates the contrary, it will be presumed that the area where the service was substantially and materially delivered or resold does not include areas outside the United States.(4-6-23)

04.Professional Services.(4-6-23)

a.In General. Except as otherwise provided in this Subsection 548.04, professional services are services that require specialized knowledge and in some cases require a professional certification, license or degree.

These services include the performance of technical services that require the application of specialized knowledge.

Professional services include, without limitation, management services, bank and financial services, financial custodial services, investment and brokerage services, fiduciary services, tax preparation, payroll and accounting services, lending services, credit card services (including credit card processing services), data processing services, legal services, consulting services, video production services, graphic and other design services, engineering services, and architectural services.(4-6-23)

b.Overlap with Other Categories of Services.(4-6-23)

i.Certain services that fall within the definition of “professional services” set forth in this Subsection 548.04 are nevertheless treated as “in-person services” within the meaning of subsection 548.02 above, and are assigned under the rules of that subsection. Specifically, professional services that are physically provided in person by the taxpayer such as carpentry, certain medical and dental services or child care services, where the customer or the customer’s real or tangible property upon which the services are provided is in the same location as the service provider at the time the services are performed, are “in-person services” and are assigned as such, notwithstanding that they may also be considered to be “professional services.” However, professional services where the service is of an intellectual or intangible nature, such as legal, accounting, financial and consulting services, are assigned as professional services under the rules of this Subsection 548.04, notwithstanding the fact that these services may involve some amount of in-person contact.(4-6-23)

ii.Professional services may in some cases include the transmission of one (1) or more documents or other communications by mail or by electronic means. In some cases, all or most communications between the service provider and the service recipient may be by mail or by electronic means. However, in these cases, despite this transmission, the assignment rules that apply are those set forth in this Subsection (548.04), and not those set forth in subsection 03 above, pertaining to services delivered to a customer or through or on behalf of a customer.

c.Assignment of Receipts. In the case of a professional service, it is generally possible to characterize the location of delivery in multiple ways by emphasizing different elements of the service provided, no one of which will consistently represent the market for the services. Therefore, the location of delivery in the case of professional services is not susceptible to a general rule of determination, and must be reasonably approximated. The assignment of receipts from a sale of a professional service depends in many cases upon whether the customer is an individual or business customer. In any instance in which the taxpayer, acti ng in good faith, cannot reasonably determine whether the customer is an individual or business customer, the taxpayer shall treat the customer as a business customer. For purposes of assigning the receipts from a sale of a professional service, a taxpayer’s customer is the person that contracts for the service, irrespective of whether another person pays for or also benefits from the taxpayer’s services.

i.General Rule. Receipts from sales of professional services other than those services described in Subparagraph 04.c.ii. below (architectural and engineering services), subparagraph 04.c.iii. below (services provided by a financial institution) and Subparagraph 548.04.c.iv. below (transactions with related parties) are assigned in accordance with this Subparagraph (548.04.c.i.).(4-6-23)

(1)Professional Services Delivered to Individual Customers. Except as otherwise provided in this Subsection 548.04 (see in particular Subparagraph 548.04.c.iv.), in any instance in which the service provided is a professional service and the taxpayer’s customer is an individual customer, the state or states in which the service is delivered must be reasonably approximated as set forth in part 548.04.c.i.(1) of this rule. In particular, the taxpayer shall assign the receipts from a sale to the customer’s state of primary residence, or, if the taxpayer cannot reasonably identify the customer’s state of primary residence, to the state of the customer’s billing address; provided, however, in any instance in which the taxpayer derives more than five percent (5%) of its receipts from sales of all services from an individual customer, the taxpayer shall identify the customer’s state of primary residence and assign the receipts from the service or services provided to that customer to that state.(4-6-23)

(2)Professional Services Delivered to Business Customers. Except as otherwise provided in this Subsection 548.04, in any instance in which the service provided is a professional service and the taxpayer’s customer is a business customer, the state or states in which the service is delivered must be reasonably approximated as set forth in this section. In particular, unless the taxpayer may use the safe harbor set forth at part 548.04.c.i.(3) below, the taxpayer shall assign the receipts from the sale as follows: first, by assigning the receipts to the state where the contract of sale is principally managed by the customer; second, if the place of customer management is not reasonably determinable, to the customer’s place of order; and third, if the customer place of order is not reasonably determinable, to the customer’s billing address; provided, however, in any instance in which the taxpayer derives more than five percent (5%) of its receipts from sales of all services from a customer, the taxpayer is required to identify the state in which the contract of sale is principally managed by the customer.(4-6-23)

(3)Safe Harbor; Large Volume of Transactions. Notwithstanding the rules set forth in parts 548.04.c.i.(1) and (2) above, a taxpayer may assign its receipts from sales to a particular customer based on the customer’s billing address in any taxable year in which the taxpayer (1) engages in substantially similar service transactions with more than two hundred fifty (250) customers, whether individual or business, and (2) does not derive more than five percent (5%) of its receipts from sales of all services from that customer. This safe harbor applies only for purposes of this Subparagraph (548.04.c.i., Professional Services General Rule) and not otherwise.

ii.Architectural and Engineering Services with respect to Real or Tangible Personal Property.

Architectural and engineering services with respect to real or tangible personal property are professional services within the meaning of this Subsection 548.04. However, unlike in the case of the general rule that applies to professional services, (1) the receipts from a sale of an architectural service are assigned to a state or states if and to the extent that the services are with respect to real estate improvements located, or expected to be located, in the state or states; and (2) the receipts from a sale of an engineering service are assigned to a state or states if and to the extent that the services are with respect to tangible or real property located in the state or states, including real estate improvements located in, or expected to be located in, the state or states. These rules apply whether or not the customer is an individual or business customer. In any instance in which architectural or engineering services are not described in this Subparagraph (548.04.c.ii.), the receipts from a sale of these services must be assigned under the general rule for professional services. See Subparagraph 548.04.c.i. above.(4-6-23)

iii.Services Provided by a Financial Institution. The apportionment rules that apply to financial institutions are set forth in Rule 582. Rule 582 includes specific rules to determine a financial institution’s sales factor . However, the Financial Institutions Rule also provides that receipts from sales, other than sales of tangible personal property, including service transactions, that are not otherwise apportioned under the Financial Institutions Rule [see section 3(o) of the 1995 MTC version of the regs or section 3(n) of the 1994 version], are to be assigned pursuant to Section 63-3027, Idaho Code, and these rules. In any instance in which a financial institution performs services that are to be assigned pursuant to Section 63-3027, Idaho Code. and these rules including, for example, financial custodial services, those services are considered professional services within the meaning of this Subsection(548.04, and are assigned according to the general rule for professional service transactions as set forth at Subparagraph 548.04.c.i. above.(4-6-23)

iv.Related Party Transactions. In any instance in which the professional service is sold to a related party, rather than applying the rule for professional services delivered to business customers in part 548.04.c.i.(2) above, the state or states to which the service is assigned is the place of receipt by the related party as reasonably approximated using the following hierarchy: (1) if the service primarily relates to specific operations or activities of a related party conducted in one or more locations, then to the state or states in which those operations or activities are conducted in proportion to the related party’s payroll at the locations to which the service relates in the state or states; or (2) if the service does not relate primarily to operations or activities of a related party conducted in particular locations, but instead relates to the operations of the related party generally, then to the state or states in which the related party has employees, in proportion to the related party’s payroll in those states. The taxpayer may use the safe harbor provided by part 548.04.c.i.(3) provided that Tax Commission may aggregate the receipts from sales to related parties in applying the five percent (5%) rule if necessary or appropriate to avoid distortion.(4-6-23)

IDAPA 35.01.01.549 Sales Factor: License or Lease or Intangible Property (rule 549)

Section 63-3027(13)(d)(i)

1. General Rules.(4-6-23)

a.The receipts from the license of intangible property are in this state if and to the extent the intangible is used in this state. In general, the term “use” is construed to refer to the location of the taxpayer’s market for the use of the intangible property that is being licensed and is not to be construed to refer to the location of the property or payroll of the taxpayer. The rules that apply to determine the location of the use of intangible property in the context of several specific types of licensing transactions are set forth at Subsections 549.02 through 05 of this rule. For purposes of the rules set forth in this Rule 549, a lease of intangible property is to be treated the same as a license of intangible property.(4-6-23)

b.In general, a license of intangible property that conveys all substantial rights in that property is treated as a sale of intangible property for purposes of Section 63-3027, Idaho Code, and these rules. See Rule 550.

Note, however, that for purposes of this Rule 549 and Rule 550, a sale or exchange of intangible property is treated as a license of that property where the receipts from the sale or exchange derive from payments that are contingent on the productivity, use or disposition of the property.(4-6-23)

c.Intangible property licensed as part of the sale or lease of tangible property is treated under Section 63-3027, Idaho Code, and these rules as the sale or lease of tangible property.(4-6-23)

d.Nothing in this Rule 548 shall be construed to allow or require inclusion of receipts in the sales factor that are not included in the definition of “receipts” pursuant to Section 63-3027(1)(i), Idaho Code, or related

02.License of a Marketing Intangible. Where a license is granted for the right to use intangible property in connection with the sale, lease, license, or other marketing of goods, services, or other items (i.e., a marketing intangible) to a consumer, the royalties or other licensing fees paid by the licensee for that marketing intangible are assigned to this state to the extent that those fees are attributable to the sale or other provision of goods, services, or other items purchased or otherwise acquired by consumers or other ultimate customers in this state.

Examples of a license of a marketing intangible include, without limitation, the license of a service mark, trademark, or trade name; certain copyrights; the license of a film, television or multimedia production or event for commercial distribution; and a franchise agreement. In each of these instances the license of the marketing intangible is intended to promote consumer sales. In the case of the license of a marketing intangible, where a taxpayer has actual evidence of the amount or proportion of its receipts that is attributable to this state, it shall assign that amount or proportion to this state. In the absence of actual evidence of the amount or proportion of the licensee's receipts that are derived from this state consumers, the portion of the licensing fee to be assigned to this state must be reasonably approximated by multiplying the total fee by a percentage that reflects the ratio of the this state population in the specific geographic area i n which the licensee makes material use of the intangible property to regularly market its goods, services or other items relative to the total population in that area. If the license of a marketing intangible is for the right to use the intangible property in connection with sales or other transfers at wholesale rather than directly to retail customers, the portion of the licensing fee to be assigned to this state must be reasonably approximated by multiplying the total fee by a percentage that reflects the ratio of the this state population in the specific geographic area in which the licensee's goods, services, or other items are ultimately and materially marketed using the intangible property relative to the total population of that area. Unless the taxpayer demonstrates that the marketing intangible is materially used in the marketing of items outside the United States, the fees from licensing that marketing intangible will be presumed to be derived from within the United States.(4-6-23)

03.License of a Production Intangible. If a license is granted for the right to use intangible property other than in connection with the sale, lease, license, or other marketing of goods, services, or other items, and the license is to be used in a production capacity (a “production intangible”), the licensing fees paid by the licensee for that right are assigned to this state to the extent that the use for which the fees are paid takes place in this state.

Examples of a license of a production intangible include, without limitation, the license of a patent, a copyright, or trade secrets to be used in a manufacturing process, where the value of the intangible lies predominately in its use in that process. In the case of a license of a production intangible to a party other than a related party where the location of actual use is unknown, it is presumed that the use of the intangible property takes place in the state of the licensee's commercial domicile (where the licensee is a business) or the licensee’s state of primary residence (where the licensee is an individual). If the Tax Commission can reasonably establish that the actual use of intangible property pursuant to a license of a production intangible takes place in part in this state, it is presumed that the entire use is in this state except to the extent that the taxpayer can demonstrate that the actual location of a portion of the use takes place outside this state. In the case of a license of a production intangible to a related party, the taxpayer must assign the receipts to where the intangible property is actually used.(4-6-23)

04.License of a Mixed Intangible. If a license of intangible property includes both a license of a marketing intangible and a license of a production intangible (a “mixed intangible”) and the fees to be paid in each instance are separately and reasonably stated in the licensing contract, the Tax Commission will accept that separate statement for purposes of Section 63-3027, Idaho Code, and these rules. If a license of intangible property includes both a license of a marketing intangible and a license of a production intangible and the fees to be paid in each instance are not separately and reasonably stated in the contract, it is presumed that the licensing fees are paid entirely for the license of the marketing intangible except to the extent that the taxpayer or the [tax administrator] can reasonably establish otherwise.(4-6-23)

05.License of Intangible Property where Substance of Transaction Resembles a Sale of Goods or Services.(4-6-23)

a.In general. In some cases, the license of intangible property will resemble the sale of an electronically-delivered good or service rather than the license of a marketing intangible or a production intangible.

In these cases, the receipts from the licensing transaction are assigned by applying the provisions set forth in Subsection 548.03.b.ii. and.iii., as if the transaction were a service delivered to an individual or business customer or delivered electronically through an individual or business customer, as applicable. Examples of transactions to be assigned under this Subsection 549.05 include, without limitation, the license of database access, the license of access to information, the license of digital goods (see Rule 551.02), and the license of certain software (e.g., where the transaction is not the license of pre-written software that is treated as the sale of tangible personal property, see Rule

IDAPA 35.01.01.551 01.(4-6-23)

b.Sublicenses. Pursuant to Paragraph 549.05.a. above, the provisions of Rule 548.03.b.iii. may apply where a taxpayer licenses intangible property to a customer that in turn sublicenses the intangible property to end users as if the transaction were a service delivered electronically through a customer to end users. In particular, the rules set forth in Rule 548.03.b.iii. that apply to services delivered electronically to a customer for purposes of resale and subsequent electronic delivery in substantially identical form to end users or other recipients may also apply with respect to licenses of intangible property for purposes of sublicense to end users. For this purpose, the intangible property sublicensed to an end user shall not fail to be substantially identical to the property that was licensed to the sublicensor merely because the sublicense transfers a reduced bundle of rights with respect to that property (e.g., because the sublicensee’s rights are limited to its own use of the property and do not include the ability to grant a further sublicense), or because that property is bundled with additional services or items of property.(4-6-23)

IDAPA 35.01.01.550 Sales Factor: Sale of Intangible Property (rule 550)

Section 63-3027(13)(d)(ii)

01.Assignment of Receipts. The assignment of receipts to a state or states in the instance of a sale or exchange of intangible property depends upon the nature of the intangible property sold. For purposes of this Rule (550), a sale or exchange of intangible property includes a license of that property where the transaction is treated for tax purposes as a sale of all substantial rights in the property and the receipts from transaction are not contingent on the productivity, use or disposition of the property. For the rules that apply where the consideration for the transfer of rights is contingent on the productivity, use or disposition of the property, see Subsection 549.01.(4-6-23)

a.Contract Right or Government License that Authorizes Business Activity in Specific Geographic Area. In the case of a sale or exchange of intangible property where the property sold or exchanged is a contract right, government license or similar intangible property that authorizes the holder to conduct a business activity in a specific geographic area, the receipts from the sale are assigned to a state if and to the extent that the intangible property is used or is authorized to be used within the state. If the intangible property is used or may be used only in Idaho the taxpayer shall assign the receipts from the sale to this state. If the intangible property is used or is authorized to be used in this state and one or more other states, the taxpayer shall assign the receipts from the sale to this state to the extent that the intangible property is used in or authorized for use in this state, through the means of a reasonable approximation.(4-6-23)

b.Sale that Resembles a License (Receipts are Contingent on Productivity, Use or Disposition of the Intangible Property). In the case of a sale or exchange of intangible property where the receipts from the sale or exchange are contingent on the productivity, use or disposition of the property, the receipts from the sale are assigned by applying the rules set forth in Rule 549 (pertaining to the license or lease of intangible property).(4-6-23)

c.Sale that Resembles a Sale of Goods and Services. In the case of a sale or exchange of intangible property where the substance of the transaction resembles a sale of goods or services and where the receipts from the sale or exchange do not derive from payments contingent on the productivity, use or disposition of the property, the receipts from the sale are assigned by applying the rules set forth in Subsection 549.05 (relating to licenses of intangible property that resemble sales of goods and services). Examples of these transactions include those that are analogous to the license transactions cited as examples in Subsection 549.05.(4-6-23)

02.Examples. Available at Income Tax Rules Examples.(4-6-23)

IDAPA 35.01.01.551 Sales Factor: Special Rules (rule 551)

Section 63-3027(13), Idaho Code Software Transactions.(4-6-23)

a.A license or sale of pre-written software for purposes other than commercial reproduction (or other exploitation of the intellectual property rights) transferred on a tangible medium is treated as the sale of tangible personal property, rather than as either the license or sale of intangible property or the performance of a service. In these cases, the receipts are in this state as determined under the rules for the sale of tangible personal property set forth under Section 63-3027(12), Idaho Code, and related rules. In all other cases, the receipts from a license or sale of software are to be assigned to this state as determined otherwise under Rules 546 through 551 (e.g., depending on the facts, as the development and sale of custom software, see Rule 548.03, as a license of a marketing intangible, see Rule 549.02, as a license of a production intangible, see Rule 549.03, as a license of intangible property where the substance of the transaction resembles a sale of goods or services, see Rule 549.05, or as a sale of intangible property, see Rule 550.(4-6-23)

02.Sales or Licenses of Digital Goods or Services.(4-6-23)

a.In general. In the case of a sale or license of digital goods or services, including, among other things, the sale of various video, audio and software products or similar transactions, the receipts from the sale or license are assigned by applying the same rules as are set forth in Subsection 548.03.b.ii. or iii., as if the transaction were a service delivered to an individual or business customer or delivered through or on behalf of an individual or business customer. For purposes of the analysis, it is not relevant what the terms of the contractual relationship are or whether the sale or license might be characterized, depending upon the particular facts, as, for example, the sale or license of intangible property or the performance of a service. See Subsections 549.05 and 550.01.c.(4-6-23)

b.Telecommunications Companies. In the case of a taxpayer that provides telecommunications or ancillary services, receipts from the sale or license of digital goods or services are assigned by applying the rules set forth in Subsection 548.03.b.ii. or iii. as if the transaction were a service delivered to an individual or business customer or delivered through or on behalf of an individual or business customer. However, in applying these rules, if the taxpayer cannot determine the state or states where a customer receives the purchased product it may reasonably approximate this location using the customer’s “place of primary use” of the purchased product.(4-6-23) i.“Place of primary use” means the street address representative of where the customer's use of the telecommunications service primarily occurs, which shall be the residential street address or the primary business street address of the customer. In the case of mobile telecommunications services, “place of primary use” shall be within the licensed service area of the home service provider.(4-6-23)

IDAPA 35.01.01.552 (Reserved)

IDAPA 35.01.01.558 Sales Factor: Costs of Performance Election for Communications

COMPANIES (RULE 558).

Section 63-3027(15), Idaho Code Election. A communications company as defined in Section 63-3027(1)(e), Idaho Code, shall source gross receipts from transactions other than sales of tangible personal property pursuant to Section 63- 3027(13), Idaho Code, and Rules 546, 548, 549, as applicable, unless it elects to source such gross receipts pursuant to Section 63-3027(15), Idaho Code, and Rule 559. The election is made by attaching a written statement of the election to the return. The statement must affirmatively state whether (1) all 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. This election may not be changed for a taxable year after the return for that year has been filed. An election under Section 63-3027(15), Idaho Code, and Rule 559 is independent from any election made pursuant to Section 63-3027(10)(b), Idaho Code, and Subsection 310.03.(4-6-23)

02.Election Binding for Future Years. The election is binding for all years thereafter; a change off election in future years may only occur with the written permission of the tax commission. A petition to change the election must include an explanation of the legal or factual basis for requesting the change and a computation of the taxpayer’s Idaho taxable income and tax liability computed using both the prior reporting method and the method the taxpayer is petitioning to use for the year of change. The written petition requesting the change of reporting method must be filed with the Tax Commission at least thirty (30) days prior to the due date for filing the tax return. (4-6-23)

IDAPA 35.01.01.559 Sales Factor: Sales Other Than Sales of

TANGIBLE PERSONAL PROPERTY IN

IDAHO FOR COMMUNICATIONS COMPANIES ELECTING TO USE COSTS OF PERFORMANCE

(RULE 559).

Section 63-3027(15), Idaho Code In General. Communications companies as defined in Section 63-3027(1)(e), Idaho Code, may elect to source gross receipts from transactions other than sales of tangible personal property, including transactions with the United States Government, under the provisions of Section 63-3027(15), Idaho Code, and this Rule 559.

Gross receipts are attributed to Idaho if the income producing activity that generates the receipts is performed wholly within Idaho. Also, gross receipts are attributed to Idaho if, with respect to a particular item of income, the income producing activity is performed within and without Idaho but the greater part of the income producing activity is performed in Idaho, based on costs of performance.(4-6-23)

02.Income Producing Activity. The term income producing activity applies to each separate item of income and means the transactions and activity engaged in by the taxpayer in the regular course of its trade or business for the ultimate purpose of producing that item of income. The activity includes transactions and activities performed on behalf of a taxpayer, such as those conducted on its behalf by an independent contractor.(4-6-23)

a.Income producing activity includes the following:(4-6-23)

i.The rendering of personal services by employees or by an agent or independent contractor acting on behalf of the taxpayer or the use of tangible and intangible property by the taxpayer or by an agent or independent contractor acting on behalf of the taxpayer in performing a service;(4-6-23)

ii.The sale, rental, leasing, licensing or other use of real property;(4-6-23)

iii.The rental, leasing, licensing or other use of tangible personal property; and(4-6-23)

iv.The sale, licensing or other use of intangible personal property.(4-6-23)

b.The mere holding of intangible personal property is not, by itself, an income producing activity.

03.Costs of Performance. Costs of performance are the direct costs determined in a manner consistent with generally accepted accounting principles and according to accepted conditions or practices of the taxpayer’s trade or business to perform the income producing activity that gives rise to the particular item of income.

Included in the taxpayer’s cost of performance are taxpayer’s payments to an agent or independent contractor for the performance of personal services and utilization of tangible and intangible property that give rise to the particular item of income.(4-6-23)

04.Application. In general, receipts, other than from sales of tangible personal property, in respect to a particular income producing activity are in Idaho if:(4-6-23)

a.The income producing activity is performed wholly in Idaho; or(4-6-23)

b.The income producing activity is performed both within and without Idaho and a greater part of the income producing activity is performed in Idaho than in any other state, based on costs of performance.(4-6-23)

05.Special Rules. The following are rules and examples for determining when receipts from the income producing activities described below are in Idaho:(4-6-23)

a.Gross receipts from the sale, lease, rental or licensing of real property are in Idaho if the real property is located in Idaho.(4-6-23)

b.Gross receipts from the rental, lease or licensing of tangible personal property are in Idaho if the property is located in Idaho. The rental, lease, licensing or other use of tangible personal property in Idaho is a separate income producing activity from the rental, lease, licensing or other use of the same property while in another state. Consequently, if property is within and without Idaho during the rental, lease or licensing period, gross receipts attributable to Idaho will be measured by the ratio that the time the property was present or used in Idaho bears to the total time or use of the property everywhere during the period.(4-6-23)

c.Example. A taxpayer owns ten (10) bulldozers. During the year, each bulldozer was in Idaho fifty (50) days. The receipts attributable to the use of each bulldozer in Idaho are separate items of income and are determined as follows: ((ten (10) bulldozers x fifty (50) days) / (ten (10) bulldozers x three hundred sixty five (365) days)) x total receipts = receipts attributable to Idaho.(4-6-23)

d.Gross receipts for the performance of personal services are attributable to Idaho to the extent the services are performed in Idaho. If services relating to a single item of income are performed within and without Idaho, they are attributable to Idaho only if a greater portion of the services were performed in Idaho, based on costs of performance. Usually if services are performed within and without Idaho, they constitute a separate income producing activity. In this case the gross receipts attributable to Idaho are measured by the ratio that the time spent in performing the services in Idaho bears to the total time spent in performing the services everywhere. Time spent in performi ng services includes the time spent in performing a contract or other obligation that generates the gross receipts. This computation does not include personal service not directly connected with the performance of the contract or other obligation, as for example, time spent in negotiating the contract.(4-6-23)

e.Example. The taxpayer, a road show, gave theatrical performances at various location in State X and in Idaho during the tax period. All gross receipts from performances given in Idaho are attributed to Idaho.

f.Example. The taxpayer, a public opinion survey corporation, conducted a poll in State X and in Idaho for the sum of nine thousand dollars ($9,000). The project required six hundred (600) man hours to obtain the basic data and prepare the survey report. Two hundred (200) of the six hundred (600) man hours were expended in Idaho. The receipts attributable to Idaho are three thousand dollars ($3,000): (200 man hours/600 man hours) x $9,000.(4-6-23)

06.Services on Behalf of the Taxpayer. An income producing activity performed on behalf of a taxpayer by an agent or independent contractor is attributed to Idaho if such income producing activity is in Idaho.

a.Such income producing activity is in Idaho: (4-6-23)

i.When the taxpayer can reasonably determine at the time of filing that the income producing activity is actually performed in Idaho by the agent or independent contractor. However, if the activity occurs in more than one state, the location where the income producing activity is actually performed will be deemed to be not reasonably determinable at the time of filing under Subparagraph 559.06.a.i. of this rule.(4-6-23)

ii.If the taxpayer cannot reasonably determine at the time of filing where the income producing activity is actually performed, when the contract between the taxpayer and the agent or independent contractor indicates it is to be performed in Idaho and the portion of the taxpayer’s payment to the agent or contractor associated with such performance is determinable under the contract.(4-6-23)

iii.If it cannot be determined where the income producing activity is actually performed and the agent or independent contractor’s contract with the taxpayer does not indicate where it is to be performed, when the contract between the taxpayer and the taxpayer’s customer indicates it is to be performed in Idaho and the portion of the taxpayer’s payment to the agent or contractor associated with such performance is determinable under the contract; or(4-6-23)

iv.If it cannot be determined where the income producing activity is actually performed and neither contract indicates where it is to be performed or the portion of the payment associated with such performance, when the domicile of the taxpayer’s customer is in this state. If the taxpayer’s customer is not an individual, “domicile” means commercial domicile.(4-6-23)

b.If the location of the income producing activity by an agent or independent contractor, or the portion of the payment associated with such performance, cannot be determined under Subparagraphs 550.06.a.i. through 559.06.a.iii. of this rule, or the taxpayer’s customer’s domicile cannot be determined under Subparagraph 559.06.a.iv. of this rule, or, although determinable, such income producing activity is in a state in which the taxpayer is not taxable, such income producing activity is to be disregarded.(4-6-23)

IDAPA 35.01.01.560 Special Rules (rule 560)

Section 63-3027(17), Idaho Code

01.In General. A departure from the allocation and apportionment provisions of Section 63-3027, Idaho Code, is permitted only in limited and specific cases where the apportionment and allocation provisions contained in Section 63-3027, Idaho Code, produce incongruous results.(4-6-23)

02.Alternate Methods. If the allocation and apportionment provisions of Section 63-3027, Idaho Code, do not fairly represent the extent of all or any part of a taxpayer’s business activity in Idaho, the taxpayer may petition for or the Tax Commission may require:(4-6-23)

a.Separate accounting;(4-6-23)

b.The exclusion of one (1) or more of the factors;(4-6-23)

c.The inclusion of one (1) or more additional factors that fairly represent the taxpayer’s business activity in Idaho; or(4-6-23)

d.The use of any other method to achieve an equitable allocation and apportionment of the taxpayer’s

03.Special Industry Methods. Section 63-3027(18), Idaho Code, authorizes the Tax Commission to establish appropriate procedures for determining the apportionment factors for each of these industries. These procedures will be applied uniformly. See Rule 580 of these rules for the list of the special industries.(4-6-23)

IDAPA 35.01.01.561 (Reserved)

IDAPA 35.01.01.565 Special Rules: Property Factor (rule 565)

01.Subrents.(4-6-23)

a.In General. If the subrents taken into account in determining the net annual rental rate pursuant to Rule 485 of these rules produce a negative or clearly inaccurate value for any item of property, another method that properly reflects the value of rented property may be required by the Tax Commission or requested by the taxpayer.

The value may not be less than an amount that bears the same ratio to the annual rental rate paid by the taxpayer for the property as the fair market value of that portion of the property used by the taxpayer bears to the total fair market value of the rented property.(4-6-23)

b.Example. A taxpayer rents a ten (10) story building at an annual rental rate of one million dollars ($1,000,000). The taxpayer occupies two (2) stories and sublets eight (8) stories for one million dollars ($1,000,000) a year. The taxpayer’s net annual rental rate may not be less than two-tenths (0.2) of the taxpayer’s annual rental rate for the entire year, or two hundred thousand dollars ($200,000).(4-6-23)

02.Market Rental Rate. If property owned by others is used by the taxpayer at no charge or rented by the taxpayer for a nominal rate, the net annual rental rate for the property is determined based on a reasonable market rental rate for the property.(4-6-23)

IDAPA 35.01.01.566 (Reserved)

IDAPA 35.01.01.570 Special Rules: Sales Factor (rule 570)

Net Gains. If gains and losses on the sale of liquid assets are not excluded from the sales factor by other provisions of this rule, such gains or losses are treated as provided in Subsection 570.01 of this rule. This subsection does not provide rules relating to the treatment of other receipts produced from holding or managing such assets. If a taxpayer holds liquid assets in connection with one (1) or more treasury functions of the taxpayer, and the liquid assets produce apportionable income when sold, exchanged or otherwise disposed, the overall net gain from those transactions for each treasury function for the tax period is included in the sales factor. For purposes of Subsection 570.01 of this rule, each treasury function is considered separately.(4-6-23)

a.For purposes of Subsection 570.01 of this rule, a liquid asset is an asset, other than functional currency or funds held in bank accounts, held to provide a relatively immediate source of funds to satisfy the liquidity needs of the trade or business. Liquid assets include foreign currency, and trading positions therein, other than functional currency used in the regular course of the taxpayer’s trade or business; marketable instruments, including stocks, bonds, debentures, bills, notes, options, warrants, futures contracts; and mutual funds which hold such liquid assets. An instrument is considered marketable if it is traded in an established stock or securities market and is regularly quoted by brokers or dealers in making a market. Stock in a corporation that is unitary with the taxpayer or has a substantial business relationship with the taxpayer is not considered marketable stock.(4-6-23)

b.For purposes of Subsection 570.01 of this rule, a treasury function is the pooling and management of liquid assets for the purpose of satisfying the cash flow needs of the trade or business, such as providing liquidity for a taxpayer’s business cycle, providing a reserve for business contingencies, and providing for business acquisitions. A taxpayer principally engaged in the trade or business of purchasing and selling instruments or other items included in the definition of liquid assets set forth herein is not performing a treasury function with respect to income so produced.(4-6-23)

c.Overall net gain refers to the total net gain from all transactions incurred at each treasury function for the entire tax period, not the net gain from a specific transaction.(4-6-23)

d.Examples.(4-6-23)

i.A taxpayer manufactures various gift items. Because of seasonal variations, the taxpayer must keep liquid assets available for later inventory acquisitions. Because the taxpayer wants to obtain a return on available funds, the taxpayer acquires liquid assets, which are held and managed in State A. The net gain resulting from all gains and losses on the sale of the liquid assets for the tax year will be reflected in the denominator of the sales factor and in the numerator of State A.(4-6-23)

ii.A stockbroker acts as a dealer or trader for its own account in its ordinary course of business. Some of the instruments sold are liquid assets. Subsection 570.01 of this rule does not operate to classify those sales as attributable to a treasury function.(4-6-23)

IDAPA 35.01.01.571 (Reserved)

IDAPA 35.01.01.580 Special Rules: Special Industries (rule 580)

Adoption of MTC Special Industry Regulations. This rule incorporates by reference the MTC special industry regulations as adopted in Subsection 003.01 of these rules. Copies of the MTC special industry regulations may also be obtained from the main office of the Idaho State Tax Commission. The following special industries are to apportion income in accordance with the applicable MTC regulation:(4-6-23)

a.Construction Contractors. The apportionment of income derived by a long-term construction contractor is to be computed in accordance with MTC Regulation IV.18.(d). as adopted July 10, 1980;(4-6-23)

b.Airlines. The apportionment of income derived by an airline is to be computed in accordance with MTC Regulation IV.18.(e). as adopted July 14, 1983;(4-6-23)

c.Railroads. The apportionment of income derived by a railroad is to be computed in accordance with MTC Regulation IV.18.(f). as adopted July 16, 1981;(4-6-23)

d.Trucking Companies. The apportionment of income derived by motor common carriers, motor contract carriers, or express carriers that primarily transport tangible personal property of others is to be computed in accordance with MTC Regulation IV.18.(g). as amended July 27, 1989, for taxable years beginning on or after January 1, 1997.(4-6-23)

e.Television and Radio Broadcasting. The apportionment of income derived from television and radio broadcasting is to be computed in accordance with MTC Regulation IV.18.(h). as amended April 25, 1996, for taxable years beginning on or after January 1, 1995.(4-6-23)

f.Publishing. The apportionment of income derived from the publishing, sale, licensing or other distribution of books, newspapers, magazines, periodicals, trade journals or other printed material is to be computed in accordance with MTC Regulation IV.18.(j). as adopted July 30, 1993, for taxable years beginning on or after January 1, 1995.(4-6-23)

g.Financial Institutions. See Rule 582 of these rules for the apportionment of income by a financial institution for taxable years beginning on or after January 1, 1998.(4-6-23)

02.References. See Rule 581 of these rules for the applicability of references used in the MTC special industry regulations and the calculation of the apportionment percentage.(4-6-23)

IDAPA 35.01.01.581 Special Rules: References Used in Mtc Special Industry Regulations (rule )

Section 63-3027(s), Idaho Code. For purposes of applying th e rules applicable to Section 63-3027, Idaho Code, references in the MTC special industry regulations means the following:(4-6-23)

01.Article IV. Of The Multistate Tax Compact.(4-6-23)

a.Article IV. means Section 63-3027, Idaho Code.(4-6-23)

b.Article IV.1 means Section 63-3027(1), Idaho Code.(4-6-23)

c.Article IV.2 means Section 63-3027(2), Idaho Code.(4-6-23)

d.Article IV.3 means Section 63-3027(3), Idaho Code.(4-6-23)

e.Article IV.4 means Section 63-3027(4), Idaho Code.(4-6-23)

f.Article IV.5 means Section 63-3027(5), Idaho Code.(4-6-23)

g.Article IV.6 means Section 63-3027(6), Idaho Code.(4-6-23)

h.Article IV.7 means Section 63-3027(7), Idaho Code.(4-6-23)

i.Article IV.8 means Section 63-3027(8), Idaho Code.(4-6-23)

j.Article IV.9 means Section 63-3027(10)(a), Idaho Code.(4-6-23)

k.Article IV.10 means Section 63-3027(16)(a), Idaho Code.(4-6-23)

l.Article IV.11 means Section 63-3027(16)(b), Idaho Code.(4-6-23)

m.Article IV.12 means Section 63-3027(16)(c), Idaho Code.(4-6-23)

n.Article IV.13 means Section 63-3027(16)(d), Idaho Code.(4-6-23)

o.Article IV.14 means Section 63-3027(16)(e), Idaho Code.(4-6-23)

p.Article IV.15 means Section 63-3027(10)(a), Idaho Code.(4-6-23)

q.Article IV.16 means Section 63-3027(12), Idaho Code.(4-6-23)

r.Article IV.17 means Section 63-3027(13), Idaho Code.(4-6-23)

s.Article IV.18 means Section 63-3027(17), Idaho Code.(4-6-23)

02.MTC Regulations.(4-6-23)

a.Regulation IV.1 means Rules 330 through 354 of these rules.(4-6-23)

b.Regulation IV.2 means Rule 325 and Rules 355 through 384 of these rules.(4-6-23)

c.Regulation IV.3 means Rules 385 through 399 of these rules.(4-6-23)

d.Regulation IV.9 means Rules 450 through 459 of these rules.(4-6-23)

e.Regulation IV.10 means Rules 460 through 479 of these rules.(4-6-23)

f.Regulation IV.11 means Rules 480 through 489 of these rules.(4-6-23)

g.Regulation IV.12 means Rules 490 through 499 of these rules.(4-6-23)

h.Regulation IV.13 means Rules 500 through 514 of these rules.(4-6-23)

i.Regulation IV.14 means Rules 515 through 524 of these rules.(4-6-23)

j.Regulation IV.15 means Rules 525 through 539 of these rules.(4-6-23)

k.Regulation IV.16 means Rules 540 through 545 of these rules.(4-6-23)

l.Regulation IV.17 means Rules 546 through 559 of these rules.(4-6-23)

m.Regulation IV.18.(a) means Rules 560 through 564 of these rules.(4-6-23)

n.Regulation IV.18.(b) means Rules 565 through 569 of these rules.(4-6-23)

o.Regulation IV.18.(c) means Rules 570 through 574 of these rules.(4-6-23)

03.Tax Administrator. Tax Administrator means Tax Commission.(4-6-23)

04.This State. This state means Idaho.(4-6-23)

05.The Apportionment Percentage.(4-6-23)

a.The default apportionment method in Idaho is sales factor only. If any MTC special industry regulation adopted by Idaho includes a property and payroll factor, by default, those provisions will be ignored, and the taxpayer will only use the sales factor provisions to calculate an apportionment percentage. However, pursuant to Section 63-3027(10)(b), Idaho Code, taxpayers subject to special industry regulations may elect to use the property, payroll, and sales factors, if the special industry regulation applicable to them provides for a property and/or payroll factor. See Rule 310 for instructions on making the election.(4-6-23)

IDAPA 35.01.01.582 Special Rules: Financial Institutions (rule 582)

Section 63-3027(s), Idaho Code Adoption of MTC Recommended Formula for the Apportionment and Allocation of Net Income of Financial Institutions. This rule incorporates by reference the MTC “Recommended Formula for the Apportionment and Allocation of Net Income of Financial Institutions” as adopted in Subsection 003.02 of these rules. A copy of this regulation may be obtained from the main office of the Idaho State Tax Commission.(4-6-23)

02.Definition of Financial Institution. “Financial institution” means:(4-6-23)

a.Any corporation or other business entity registered under state law as a bank holding company or registered under the Federal Bank Holding Company Act of 1956, as amended, or registered as a savings and loan holding company under the Federal National Housing Act, as amended;(4-6-23)

b.A national bank organized and existing as a national bank association pursuant to the provisions of the National Bank Act, Title 12, Sections 21 et seq., United States Code;(4-6-23)

c.A savings association or federal savings bank as defined in the Federal Deposit Insurance Act, Title 12, Section 1813(b)(1), United States Code;(4-6-23)

d.Any bank or thrift institution incorporated or organized under the laws of any state;(4-6-23)

e.Any corporation organized under the provisions of Title 12, Sections 611 to 631, United States

f.Any agency or branch of a foreign depository as defined in Title 12, Section 3101, United States

g.A production credit association organized under the Federal Farm Credit Act of 1933, all of whose stock held by the Federal Production Credit Corporation has been retired;(4-6-23)

h.Any corporation or other business entity that is more than fifty percent (50%) owned, directly or indirectly, by any person or business entity described in Paragraphs 582.02.a. through 582.02.g.(4-6-23)

i.A corporation or other business entity that, in the current tax year and immediately preceding two (2) tax years, derived more than fifty percent (50%) of its total gross income for financial accounting purposes from finance leases. For purposes of this subsection, a finance lease means any lease transaction which is the functional equivalent of an extension of credit and that transfers substantially all of the benefits and risks incident to the ownership of property. This includes any direct financing lease or leverage lease that meets the criteria of Financial Accounting Standards Board Statement No. 13, Accounting for Leases or any other lease that is accounted for as a financing lease by a lessor under generally accepted accounting principles.(4-6-23)

j.Any corporation or business entity that derives more than fifty percent (50%) of its gross income from activities that a person described in Paragraphs 582.02.a. through 582.02.g. and 582.02.i. of this rule is authorized to transact. For purposes of this subsection, the computation of gross income does not include income from non-recurring, extraordinary items.(4-6-23)

03.Exclusion from Paragraph 582.02.j. The Tax Commission is authorized to exclude any person from the application of Paragraph 582.02.j. upon such person proving, by clear and convincing evidence, that the income-producing activity of such person is not in substantial competition with those persons described in Paragraphs 582.02.a. through 582.02.g. and 582.02.i.(4-6-23)

04.Act Defined. For purposes of applying the rules applicable to Section 63-3027, Idaho Code, references to [Act] in the MTC Recommended Formula for Financial Institutions refers to the Idaho Income Tax Act.

IDAPA 35.01.01.583 (Reserved)

IDAPA 35.01.01.585 Exceptions to Apportionment Formula: Separate Accounting (rule 585)

Section 63-3027(17), Idaho Code. Separate accounting may be used only with prior approval of the Tax Commission.

A written request must be filed with the Tax Commission at least thirty (30) days prior to the due date for filing the return. The Tax Commission is to notify the taxpayer whether the request has been approved or denied. This determination is be based on whether the taxpayer has overcome the presumption that separate accounting will not be allowed when unitary filing and apportionment more accurately reflect the taxpayer’s income.(4-6-23)

IDAPA 35.01.01.586 (Reserved)

IDAPA 35.01.01.595 Exceptions to Apportionment Formula: Additional or Substitute Factors

(RULE 595).

Section 63-3027(17), Idaho Code. A factor other than the sales factor may be used only with prior approval of the Tax Commission. A written request must be filed with the Tax Commission at least thirty (30) days prior to the due date for filing the return. The Tax Commission is to notify the taxpayer whether the request has been approved or denied.

The taxpayer must establish that the use of the additional factor or substitute factor more accurately reflects the taxpayer’s income.(4-6-23)

IDAPA 35.01.01.596 (Reserved)

IDAPA 35.01.01.600 Entities Included in a Combined Report (rule 600)

Section 63-3027(22), Idaho Code

01.Combined Report. Each corporation that is a member of a unitary business transacting business within and without Idaho is to allocate and apportion its income to Idaho using a combined report pursuant to Rules 360 through 369 of these rules. See Rules 340 through 344 of these rules for the principles for determining the existence of a unitary business.(4-6-23)

02.Domestic International Sales Corporations. If an affiliated group subject to the income tax jurisdiction of Idaho owns more than fifty percent (50%) of the voting power of the stock of a corporation classified as a Domestic International Sales Corporation (DISC) pursuant to the provisions of Section 992, Internal Revenue Code, a combined filing with the DISC is required.(4-6-23)

03.Foreign Sales Corporations. If an affiliated group subject to the income tax jurisdiction of Idaho owns more than fifty percent (50%) of the voting power of the stock of a corporation classified as a Foreign Sales Corporation (FSC) pursuant to the provisions of Section 922, Internal Revenue Code, a combined filing with the FSC is required.(4-6-23)

04.Intercompany Transactions. If a return is filed on a combined basis, the intercompany transactions are to be eliminated to the extent necessary to properly reflect combined income and to properly compute the apportionment factor.(4-6-23)

a.Dividends received from a real estate investment trust or a regulated investment company and not included in the pre-apportionment tax base as a result of the federal deduction for dividends paid allowed to the dividend payor are not eliminated as intercompany transactions in computing combined income.(4-6-23)

b.Internal Revenue Code Section 1248 Dividends.(4-6-23)

i.Taxpayers Using the Worldwide Filing Method. A corporation included in a worldwide combined group is to treat Section 1248 dividends as dividends for Idaho income tax purposes. An intercompany dividend elimination is allowed to the extent dividends received are paid from current or prior year earnings previously included in income subject to apportionment.(4-6-23)

ii.Taxpayers Using the Water’s Edge Filing Method. A corporation included in a water’s edge combined group is to treat Section 1248 dividends as dividends that qualify for the dividend exclusion allowed by Section 63-3027C(c)(1), Idaho Code.(4-6-23)

c.Dividends received from a stock insurance subsidiary and deducted by a mutual insurance holding company or an intermediate holding company pursuant to Section 41-3821, Idaho Code, are not eliminated as intercompany transactions in computing combined income.(4-6-23)

05.Insurance Companies. Pursuant to Section 41-405, Idaho Code, payment of an Idaho tax upon an insurance company’s premiums will be in lieu of an income tax.(4-6-23)

a.If an insurance company is a member of a unitary business and pays the Idaho premium tax, the insurance company is to be included in the combined group and its income and factor attributes included in the combined report. The income tax attributable to the insurance company is to be deducted from the total tax computed in the combined report. Income tax credits that the insurance company may have earned may not be shared with other members of the unitary group.(4-6-23)

b.If an insurance company is a member of a unitary business and pays a premium tax to a state other than Idaho, or does not pay a premium tax to any state, the insurance company is to be included in the combined group and its income and factor attributes included in the combined report. The insurance company is liable for the Idaho income tax computed on its activity in Idaho and is not exempt from the income tax as a result of Section 41- 405, Idaho Code.(4-6-23)

IDAPA 35.01.01.601 (Reserved)

IDAPA 35.01.01.605 Elements of a Worldwide Combined Report (rule 605)

Section 63-3027(22), Idaho Code Income: In General. Income for the worldwide combined group is to be computed on the same basis as taxable income subject to modifications contained in Sections 63-3022 and 63-3027, Idaho Code, and related

02.Income: Foreign Corporations Included in a Federal Consolidated Return. Corporations incorporated outside the United States that are included in a federal consolidated return is to include in the combined report the taxable income reported on the federal consolidated return.(4-6-23)

03.Income: Foreign Corporations Not Included in a Federal Consolidated Return. Corporations incorporated outside the United States that are not included in a federal consolidated return, is to include in the combined report either the amount in Subsection 605.03.a. or 605.03.b. as the equivalent of taxable income. The option chosen must be used for all unitary foreign corporations not included in a federal consolidated return.

a.The taxpayer may use the financial net income before income taxes as reported to the United States Securities and Exchange Commission (SEC) if required to file with the SEC. If not required to file with the SEC, the taxpayer may use the financial net income before income taxes as reported to shareholders and subject to review by an independent auditor.(4-6-23)

b.The taxpayer may use the financial net income of each foreign corporation adjusted to conform to tax accounting standards as would be required by the Internal Revenue Code if the corporation were a domestic corporation required to file a federal income tax return.(4-6-23)

04.Consistent Application of Book to Tax Adjustments. If adjustments are made to conform financial net income to tax accounting standards, all book to tax adjustments as required by the Internal Revenue Code for domestic corporations is to be made for each unitary foreign corporation included in the combined report and is to be consistently applied in each year for which the worldwide method applies. These adjustments are subject to the record-keeping requirements of the Internal Revenue Code and Treasury Regulations for domestic corporations.(4-6-23)

05.Apportionment Factors. The rules for inclusion, value, and attribution of apportionment factors by location for the worldwide combined group is to be determined pursuant to Section 63-3027, Idaho Code, and related rules. Only the apportionment factor attributes of those corporations included in the worldwide combined group may be used.(4-6-23)

IDAPA 35.01.01.606 (Reserved)

IDAPA 35.01.01.620 Attributing Income of Corporations That Are Members of Partnerships

(RULE 620).

In General. If a corporation required to file an Idaho income tax return is a member of an operating partnership, the corporation is to report its Idaho taxable income, including its share of income from the partnership, in accordance with this rule. For purposes of this rule, the term partnership includes a joint venture.(4-6-23)

02.Transacting Business. A corporation is transacting business in Idaho if it is a partner in a partnership that is transacting business in Idaho even though the corporation has no other contact with Idaho. In this case, both the partnership and the corporation have an Idaho filing requirement.(4-6-23)

03.Multistate Partnerships. If a partnership operates in more than one state, its income is to be apportioned and allocated on the partnership return as if the partnership were a corporation. The allocation and apportionment rules of Section 63-3027, Idaho Code, and related rules apply to the partnership.(4-6-23)

04.Partnership Income as Apportionable Income of the Partner.(4-6-23)

a.Income. If the income or loss of a partnership is apportionable income or loss to a corporate partner, its share of this net apportionable income or loss is to be apportioned together with all other net apportionable income or loss of the corporation. Apportionable income or loss is defined by Section 63-3027(1)(a), Idaho Code, and Rules 330 through 336 of these rules.(4-6-23)

b.Factors. A corporate partner’s share of the partnership property, payroll, and sales after intercompany eliminations, is to be included in the numerators and the denominators of the partner’s property, payroll, and sales factors when computing its apportionment formula. The partner’s share of the partnership’s property, payroll, and sales is determined by attributing the partnership’s property, payroll, and sales to the partner in the same proportion as its distributive share of partnership income if reporting net income for the taxable year or in the same proportion as its distributive share of partnership losses if reporting a net loss for the taxable year. Generally, the partnership’s property, payroll, and sales includable in the corporation’s factor computations is determined in accordance with Section 63-3027, Idaho Code, and related rules. To determine how the sales attribution rules of Sections 63-3027(12) and (13), Idaho Code, apply to the sales factor of the corporate partner, the sales of the partnership are treated as if they were sales of the corporation.(4-6-23)

05.Partnership Income as Nonapportionable Income of Partner.(4-6-23)

a.Income. If the partnership income or loss is not apportionable income to a corporate partner, the income is nonapportionable income as defined in Section 63-3027(1)(h), Idaho Code, and Rules 335 through 339 of these rules. The corporate partner is to allocate the nonapportionable income to the state in which it was earned. The corporate partner, on its Idaho corporation income tax return, is to specifically allocate to Idaho its share of the nonapportionable income attributable to Idaho.(4-6-23)

b.Factors. If the partnership income or loss is nonapportionable income to the corporate partner, none of the partnership property, payroll, or sales may be included in the computation of the factors of the corporation.

IDAPA 35.01.01.621 (Reserved)

IDAPA 35.01.01.640 Water's Edge: Making the Election (rule 640)

01.In General. Rules 640 through 649 of these rules apply to taxpayers electing to use the water’s edge filing method. To the extent that these rules conflict with any other rules pursuant to this Act, Rules 640 through 649 of these rules control.(4-6-23)

02.The Election. The water’s edge election is made for purposes of determining which corporations are included in a combined group for Idaho income tax purposes. If a corporation is not part of a unitary group for which a combined report is required, the corporation cannot make the water’s edge election. The election must be made in accordance with Sections 63-3027B through 63-3027E, Idaho Code, and Rules 640 through 649 of these

a.The election may be made for a year beginning on or after January 1, 1993. The election must be filed with the original tax return for the first year of the election. If the water’s edge group changes in a subsequent year through the acquisition or disposition of a corporation with an Idaho filing requirement, a copy of the election is to be attached to the tax return for such taxable year and the changes to the water’s edge group is to be noted on the form. See Rule 643 of these rules for Change of Election.(4-6-23)

b.Any corporation included in the unitary group that files with Idaho a consent to the reasonable production of documents may make the election on behalf of the group. An election made by any member of a unitary group binds all other members regardless of any changes in the unitary group in later taxable years.(4-6-23)

c.The election must be made on a form provided by the Tax Commission and include a list of each corporation required to file an Idaho income tax return. The election must be signed by an individual authorized to bind all companies to the election.(4-6-23)

d.Idaho taxpayers having a valid water’s edge election is to compute Idaho taxable income in accordance with Sections 63-3027 and 63-3022, Idaho Code, except as modified by Sections 63-3027B through 63- 3027E, Idaho Code, and Rules 640 through 649 of these rules.(4-6-23)

03.Failure to Include Election. Failure to include the election with the first return to which the election applies results in Idaho taxable income being determined in accordance with Sections 63-3027 and 63-3022,

IDAPA 35.01.01.641 Water's Edge: Elements of a Combined Repor

T (RULE 641).

Income. Income for the water’s edge combined group is computed on the same basis as taxable income subject to modifications contained in Sections 63-3022 and 63-3027, Idaho Code, and related rules.

Intercompany transactions between members of the water’s edge combined group is to be eliminated to the extent necessary to properly reflect combined income. Transactions between a member of the water’s edge combined group and a nonincluded affiliated corporation will be included in the computation of the income of the water’s edge combined group.(4-6-23)

02.Factors. The rules for inclusion, value, and attribution of apportionment factors by location for the water’s edge combined group is to be determined pursuant to Section 63-3027, Idaho Code, and related rules.

Intercompany transactions between members of the group is to be eliminated to the extent necessary to properly compute the apportionment factors of the water’s edge combined group. Transactions between a member of the water’s edge combined group and a nonincluded affiliated corporation is to be included, if appropriate, when determining apportionment factors. Dividends, to the extent included in apportionable income, is to be included in the sales factor computation.(4-6-23)

03.Foreign Corporations Filing Protective Returns. A foreign corporation filing a protective Form 1120-F return will not be deemed to be filing a federal income tax return for purposes of taking into account the income and apportionment factors of affiliated corporations in a unitary relationship with the taxpayer solely on the basis of filing this federal return. If subsequent to the filing of the protective 1120-F return it is determined that the foreign corporation had income effectively connected with the United States and was required to file a federal income tax return, the income and apportionment factors of the foreign corporation is required to be included in the combined report of the unitary group for such taxable year and an Idaho return or amended return may be required.(4-6-23)

IDAPA 35.01.01.642 Water’s Edge: Legal and Procedural Requirements (rule 642)

Required Form. Proper filing of the water’s edge election and consent for production of records must be made on the form provided by the Tax Commission and included in the original income tax return for the first tax year to which the election applies.(4-6-23)

02.Required Information. The following information must be included with each year’s tax return for which a water’s edge election applies:(4-6-23)

a.A complete list of all affiliated corporations, foreign and domestic, of which more than twenty percent (20%) of the voting stock is, directly or indirectly, owned or controlled by a common owner;(4-6-23)

b.Identifying information for each member of the water’s edge combined group, including: federal identification number, primary business activities, percent of ownership by members of the combined group, and dates of acquisition or disposition of interest;(4-6-23)

c.A copy of the federal consolidated return, if applicable; and(4-6-23)

d.A schedule of taxable income for each possession corporation excluded from the water’s edge group pursuant to Section 63-3027B(a), Idaho Code.(4-6-23)

IDAPA 35.01.01.643 Water’s Edge: Change of Election (rule 643)

Section 63-3027C, Idaho Code In General. Except as provided in Section 63-3027C(a) (1), Idaho Code, the taxpayer must submit a written petition to the Tax Commission and be granted written permission to change its reporting method from water’s edge for any subsequent tax year.(4-6-23)

a.A change in the reporting method includes conversion from the water’s edge filing method to the worldwide filing method as well as the addition of companies previously omitted or the exclusion of companies previously included in the water’s edge combined group, except in the case of companies acquired or disposed of during the taxable year.(4-6-23)

b.The Tax Commission may determine that one or more affiliated corporations should be included or excluded from the water’s edge combined group. Income and apportionment factors is to be modified accordingly.

02.Written Petition. A written petition must include the following:(4-6-23)

a.An explanation of the legal or factual basis for requesting the change of reporting method; and

b.A computation of the taxpayer’s Idaho taxable income and tax liability computed using both the prior reporting method and the method the taxpayer is petitioning to use for the year of change.(4-6-23)

03.Due Date for Filing the Written Petition. The written petition requesting the change of reporting method must be filed with the Tax Commission at least thirty (30) days prior to the due date for filing the tax return.

04.Failure to Provide Required Information. Failure to provide complete and accurate information necessary for the Tax Commission’s review of the petition constitutes grounds for denial of the taxpayer’s petition or disregard of the taxpayer’s election.(4-6-23)

05.Approval Attached to Original Return. A copy of the Tax Commission’s written approval of the change in reporting method must be attached to the original return for the year in which the change is first made.

06.Appeal Rights. A taxpayer may appeal the Tax Commission’s denial of a request to change the method of filing, by submitting a written letter of protest within sixty-three (63) days from date of the denial. If permission to change its filing method is denied, the taxpayer is to continue to file its income tax return with the method used in the previous year. If the appeal is resolved in the taxpayer’s favor, the taxpayer may file an amended return for the year of change.(4-6-23)

IDAPA 35.01.01.644 Water’s Edge: Disregarding the Election (rule 644)

Sections 63-3027B and 63-3027C, Idaho Code. If a taxpayer fails to comply with Sections 63-3027B through 63- 7E, Idaho Code, and Rules 640 through 649 of these rules, the Tax Commission may disregard the water’s edge election or recompute the water’s edge combined income and apportionment factors, and assert penalties pursuant to Section 63-3046, Idaho Code, and Rules 400 through 419 of the Administration and Enforcement Rules.(4-6-23)

IDAPA 35.01.01.645 Water’s Edge: Treatment of Dividends (rule 645)

Section 63-3027C, Idaho Code Dividends Received from Payors Incorporated Outside the United States.(4-6-23)

a.Dividends received from payors who are incorporated outside the fifty (50) states and District of Columbia but are not included in the combined report are treated as apportionable income.(4-6-23)

b.As provided in Section 63-3027C(e)(1), Idaho Code, amounts included in income under sections 951 and 951A of the Internal Revenue Code are treated as dividends from payors outside the fifty (50) states and District of Columbia.(4-6-23)

c.In order to avoid taxing income that had previously been included in Idaho apportionable income in a prior tax year, the remaining portion of the dividend that was not excluded from Idaho apportionable income under Section 63-3027C(c)(3), Idaho Code, is excluded from Idaho apportionable income if the taxpayer can prove that the income was previously included in Idaho apportionable income in a prior tax year.(4-6-23)

02.Dividends Received from Payors Incorporated in the United States. Dividends received from payors who are incorporated within the fifty (50) states and District of Columbia but not included in the combined return are presumed to be apportionable income of the water’s edge combined group.(4-6-23)

03.Deemed Dividends from Possession Corporations. The income of a possession corporation, excluded in Section 63-3027B(a), Idaho Code, shall be included in apportionable income as a deemed dividend received from a payor incorporated outside the fifty (50) states and District of Columbia. The income of a possession corporation means taxable income greater than zero (0). Losses from possession corporations may not offset income of other possession corporations in determining the amount of deemed dividends.(4-6-23)

04.Dividends from Foreign Sales Corporations.(4-6-23)

a.As provided in Section 63-3027C(d)(1), Idaho Code, dividends received from a Foreign Sales Corporation (FSC) shall be eliminated in the proportion that FSC federal taxable income for the year during which the dividend was paid bears to the total FSC income before taxes for that year. For purposes of computing the dividend elimination, total FSC income before taxes means book income before the deduction of federal income taxes.(4-6-23)

b.For example, a FSC paid one million dollars ($1,000,000) in dividends during the taxable year. For that same taxable year, the FSC had federal taxable income totaling ten million dollars ($10,000,000) and total FSC income before taxes of twenty million dollars ($20,000,000). The dividends eliminated would be five hundred thousand dollars ($500,000) computed as follows: (($10,000,000 federal taxable income / $20,000,000 total FSC income before taxes) X $1,000,000 FSC dividend paid = $500,000 dividend elimination).(4-6-23)

05.Interest Expense Offset. The interest expense offset provided in Section 63-3022M, Idaho Code, does not apply to any dividends subject to the eighty-five percent (85%) or eighty percent (80%) exclusion provided in Section 63-3027C or 63-3027E, Idaho Code.(4-6-23)

IDAPA 35.01.01.646 Water’s Edge: Domestic Disclosure Spreadsheet (rule 646)

Section 63-3027E, Idaho Code Filing Requirements. The domestic disclosure spreadsheet required by Section 63-3027E(b), Idaho Code, must be filed no later than six (6) months after filing the original return unless the taxpayer makes a declaration to forego the filing of the spreadsheet. The declaration is made on a year-by-year basis.(4-6-23)

02.Spreadsheet Information. The spreadsheet information must be submitted using the forms contained in the Tax Commission’s “Idaho Water’s Edge Election Pamphlet” or on identically formatted forms that disclose the same information.(4-6-23)

IDAPA 35.01.01.647 (Reserved)

IDAPA 35.01.01.700 Credit for Income Taxes Paid Another State or Territory: in General

(RULE 700).

Section 63-3029, Idaho Code Taxes Not Eligible for the Credit. If any tax or portion thereof is imposed on capital stock, retained earnings, stock values, or a basis other than income, the tax is not eligible for the credit. The credit is not allowed for income taxes imposed by another state on income not taxed by Idaho.(4-6-23)

02.Credit Calculated on a State-by-State Basis. The credit and credit limitations are to be calculated on a state-by-state basis. The taxpayer may not aggregate the income taxed by other states or the taxes paid to the other states for purposes of calculating the credit and its limitations.(4-6-23)

03.Income Tax Payable to Another State. The income tax payable to another state is to be the tax paid after the application of all credits. The tax paid to the other state must be for the same taxable year that the credit is claimed. Tax paid to cities or counties does not qualify for the credit.(4-6-23)

04.Affected Business Entities.(7-1-24)

a.The credit provided in Section 63-3026B(7)(b), Idaho Code, for income taxes paid to another state by an affected business entity, shall be calculated as specified in that statute. The credit is a pro rata share of the actual tax paid to the other state. The pro rata share of the tax credit is calculated by excluding the share of any member that is an exempt entity.(7-1-24)

b.If a pass through entity has not elected to be treated as an affected business entity in Idaho, but pays an entity level income tax in another state, an Idaho resident who is a shareholder, partner, or member is allowed the Idaho credit for taxes paid to another state to the extent the tax is attributable to the individual as a result of his share of the entity's taxable income in another state, as provided in Section 63-3029(1), Idaho Code.(7-1-24)

05.Limitations. The credit for taxes paid to another state is limited as follows:(4-6-23)

a.The credit allowed may not exceed the amount of tax actually paid to the other state. This includes the amount paid by a qualifying individual and the amount paid for such individual by an S corporation, partnership, limited liability company, estate, or trust.(4-6-23)

b.If an individual receives a refund due to a refundable credit for all or part of the income tax paid by the pass-through entity, the amount of the refund attributable to the refundable credit reduces the income tax paid by the pass-through entity.(4-6-23)

c.The credit may not exceed the proportion of the tax otherwise due to Idaho that the adjusted gross income of the individual derived from sources in the other state as modified by Chapter 30, Title 63, Idaho Code, bears to total adjusted gross income for the individual so modified. (4-6-23)

d.The credit allowed to an estate or trust may not exceed the proportion of the tax otherwise due to Idaho that the federal total income of the estate or trust derived from sources in the other state and taxed by that state bears to the federal total income of the estate or trust.(4-6-23)

i.Federal total income of the estate or trust derived from sources in the other state is to be determined using the Idaho sourcing rules applicable to nonresidents found in Section 63-3026A, Idaho Code and related rules.

Income derived from the ownership or disposition of any interest in real or tangible personal property located in the other state is to be considered to be income derived from sources in the other state. Interest income earned on a bank account generally would not be income derived from sources in the other state as provided in Rule 266 of these rules.

IDAPA 35.01.01.701 Credit for Income Taxes Paid Another State or Territory: Part-Year

RESIDENTS (RULE 701).

Section 63-3029, Idaho Code Examples. Available at Income Tax Rules Examples.(4-6-23)

IDAPA 35.01.01.702 (Reserved)

IDAPA 35.01.01.705 Credit for Contributions to Educational Institutions for Taxable Years

BEGINNING AFTER 2010 (RULE 705).

Section 63-3029A, Idaho Code Pass-Through Entities. The credit may be earned by a partnership, S corporation, estate or trust and passed through to the partner, shareholder, or beneficiary.(4-6-23)

02.Other Limitations.(4-6-23)

a.This credit plus other nonrefundable credits may not reduce the taxpayer’s tax liability below zero (0).(4-6-23)

03.Effect on Itemized Deductions. The credit allowed does not reduce the amount of charitable contributions that may be included in itemized deductions.(4-6-23)

04.Nonprofit Public and Private Museums. To qualify as a museum pursuant to Section 63-3029A, Idaho Code, the public or private nonprofit institution must be organized for the purpose of collecting, preserving, and displaying objects of aesthetic, educational, or scientific value and must be open to the general public on a regular basis.(4-6-23)

IDAPA 35.01.01.706 (Reserved)

IDAPA 35.01.01.710 Idaho Investment Tax Credit: in General (rule 710)

Credit Allowed. The investment tax credit allowed by Section 63-3029B, Idaho Code, applies to investments made during tax years beginning on and after January 1, 1982, that qualify pursuant to Sections 46(c), 47, and 48, Internal Revenue Code, as in effect prior to amendment by Public Law 101-508. Investments must also meet the requirements of Section 63-3029B, Idaho Code.(4-6-23)

02.Limitations. The investment tax credit allowable in any taxable year will be limited by the following:(4-6-23)

a.Tax liability.(4-6-23)

i.For taxable years beginning on or after January 1, 2000, the credit claimed may not exceed fifty percent (50%) of the tax after credit for taxes paid another state.(4-6-23)

ii.For taxable years beginning on or after January 1, 1995 and before January 1, 2000, the credit claimed may not exceed forty-five percent (45%) of the tax after credit for taxes paid another state.(4-6-23)

b.Unitary taxpayers. Limitations apply to each taxpayer according to its own tax liability. Each

c.Nonrefundable credits. The investment tax credit is a nonrefundable credit. It is applied to the income tax liability in the priority order for nonrefundable credits described in Rule 799 of these rules.(4-6-23)

d.Used Property Limitation. The term used property limitation means the one hundred fifty thousand dollar ($150,000) limitation imposed by Section 48, Internal Revenue Code of 1986 prior to November 5, 1990.

03.Carryovers.(4-6-23)

a.Investment tax credit earned on investments made on or after January 1, 1990, but not claimed against tax in the year earned is eligible for a seven (7) year carryover. If a credit carryover from these years is available to be carried into taxable years beginning on or after January 1, 2000, the credit carryover is extended from seven (7) years to fourteen (14) years.(4-6-23)

b.Investment tax credit earned on investments made in taxable years beginning on or after January 1, 2000, but not claimed against tax in the year earned is eligible for a fourteen (14) year carryover.(4-6-23)

04.Motor Vehicle. Motor vehicle means a self-propelled vehicle that is registered or may be registered for highway use pursuant to the laws of Idaho. Gross vehicle weight is determined by the manufacturer’s specified gross vehicle weight.(4-6-23)

05.Expensed Property. The cost of property that the taxpayer elects to expense pursuant to Section 179, Internal Revenue Code, is not a qualified investment.(4-6-23)

06.Bonus Depreciation. The cost of property that the taxpayer elects to deduct as bonus first-year depreciation pursuant to Section 168(k), Internal Revenue Code, is not a qualified investment when the bonus firstyear depreciation was also allowed in computing depreciation for Idaho.(4-6-23)

07.Examples. Available at Income Tax Rules Examples.(4-6-23)

IDAPA 35.01.01.711 Idaho Investment Tax Credit: Taxpayers Entitled to the Credit (rule 711)

Unitary Taxpayers. A corporation included as a member of a unitary group may elect to share the investment tax credit it earns but does not use with other members of the unitary group. Before the corporation may share the credit, it must claim the investment tax credit to the extent allowable against its tax liability.(4-6-23)

a.The credit available to be shared is the amount of investment tax credit carryover and credit earned for the taxable year that exceeds the limitation provided in Section 63-3029B(4), Idaho Code. The limitation is applied against the tax computed for the corporation that claims the credit. Credit shared with another member of the unitary group reduces the carryforward.(4-6-23)

b.In the taxable year when a corporation that earned the investment tax credit is acquired or disposed of, only a portion of the tax of the other members of the unitary group may be offset with shared investment tax credit from that corporation. To determine the allowable portion of the tax, a percentage is calculated by dividing the number of days that the corporation that earned the investment tax credit is included in the unitary group’s taxable year by the total number of days in the taxable year. The tax for each member with an Idaho filing requirement is multiplied by the percentage. The result is the amount of tax that can be offset with a share of the credit, subject to other limitations imposed by law or related rules.(4-6-23)

02.Conversion of C Corporation to S Corporation.(4-6-23)

a.An investment tax credit carryover earned by a C corporation that has converted to an S corporation is allowed against the S corporation’s tax on net recognized built-in gains and excess net passive income. The credit is allowed against this tax until the carryover period has expired. The credit is not allowed against the tax computed pursuant to Section 63-3022L, Idaho Code. In addition, the credit may not be passed through to the S corporation shareholders.(4-6-23)

b.The election to file as an S corporation does not cause recapture of investment tax credit. However, the S corporation is liable for any recapture of credit originally claimed by the C corporation as provided by Rule 715 of these rules.(4-6-23)

03.Agricultural Cooperatives. The portion of the investment tax credit earned by an agricultural cooperative that it cannot use for the taxable year is to be allocated to the members of the cooperative. If qualifying property is disposed of or ceases to qualify prior to the close of its estimated useful life, the recapture of credit as provided by Rule 715 of these rules applies as though the cooperative did not allocate any of the original credit to the members.(4-6-23)

a.The investment tax credits claimed by the agricultural cooperative and its members may not be mo re than one hundred percent (100%) of the credit earned.(4-6-23)

04.Leased Property. Generally, the credit for qualified investments in leased property is claimed by the lessor. A lessee may claim the investment tax credit on leased property only as provided in Paragraphs 711.04.a. and 711.04.b. of this rule.(4-6-23)

a.If the lessor elected to pass the investment tax credit to the lessee and filed the federal election pursuant to the Internal Revenue Code and Treasury Regulations prior to the 1986 Tax Reform Act, the investment tax credit is to be claimed by the lessee. Both parties must attach the original election and a schedule identifying the qualifying property.(4-6-23)

b.If a taxpayer is a lessee in a conditional sales contract, he is entitled to the investment tax credit on any qualifying property subject to the contract since the lessee is considered the purchaser of the property.(4-6-23)

IDAPA 35.01.01.712 (Reserved)

IDAPA 35.01.01.714 Idaho Investment Tax Credit: Credit Earned on Property Used Both in and

OUTSIDE IDAHO IN TAXABLE YEARS BEGINNING ON OR AFTER JANUARY 1, 1995 (RULE 714).

01.In General. Property must be used at least part of the time in Idaho to qualify for the investment tax credit, provided it otherwise qualifies for the credit. It must also be used in Idaho in each taxable year during the recapture period.(4-6-23)

02.Election of Methods. The taxpayer must elect to compute the investment tax credit on property used both in and outside Idaho using either the percentage-of-use method or the amount of that property correctly included in the Idaho property factor numerator. The credit for all property used both in and outside Idaho must be computed using the method elected.(4-6-23)

a.Percentage-of-Use Method. If the percentage-of-use method is elected, the basis of each qualified asset is multiplied by the percentage of time, miles, or other measure that accurately reflects the use of that asset in Idaho. The use of aircraft within and without Idaho during the taxable year will be determined by the ratio of departures from locations in Idaho to total departures.(4-6-23)

b.Property Factor Method. If the property factor numerator option is elected, the qualified investment is the basis of the asset correctly included in the numerator of the Idaho property factor for the year the credit is earned.(4-6-23)

i.The amounts of investment tax credit computed under the percentage-of-use method and the property factor numerator option are generally the same. Differences may result when a taxpayer uses certain MTC special industry regulations that allow the taxpayer to vary from using the percentage-of-use method for determining the Idaho numerator for each item of mobile property, and instead allow another method, such as the ratio of mobile property miles in the state compared to total mobile property miles or the ratio of departures of aircraft from locations in the state compared to total departures. These special industry regulations include the regulations for airlines, railroads, and trucking companies. See Rule 580 of these rules for a list of the special industries.(4-6-23) ii.“Correctly included in the numerator of the Idaho property factor” means that the amount included in the Idaho property factor numerator was correctly computed using Section 63-3027, Idaho Code, and related rules including any MTC special industry regulations that apply to the taxpayer. If the amount included in the Idaho property factor numerator exceeds the amount that should have been included using Section 63-3027, Idaho Code and related rules, the investment tax credit will be allowed only on the amount that reflects the correct calculation for purposes of computing the Idaho property factor numerator. For example, a taxpayer includes one hundred percent (100%) of the basis of an asset in the Idaho property factor numerator, but the amount correctly computed under Section 63-3027, Idaho Code, should have been fifty percent (50%) of the basis of the asset. The investment tax credit will be allowed only on the fifty percent (50%) of the basis of the asset.(4-6-23)

3. Order of Limitations. The qualified investment in property used both in and outside Idaho is determined by first applying the rules of this section and th en the used property limitations outlined in Rule 710.

IDAPA 35.01.01.715 Idaho Investment Tax Credit: Recapture (rule 715)

01.In General. If a taxpayer is claiming or has claimed the investment tax credit for property sold or otherwise disposed of, or that ceases to qualify pursuant to Section 63-3029B, Idaho Code, prior to being held five (5) full years, a recomputation of the credit will be made.(4-6-23)

02.Recomputation of the Investment Tax Credit.(4-6-23)

a.The recomputation of the credit and any recapture of prior credits is made pursuant to the Internal Revenue Code and Treasury Regulations for the taxable year in which the property is disposed of or ceases to qualify.

b.The recapture is computed by multiplying the credit by the applicable recapture percentage in Subsection 715.04.(4-6-23)

c.The recapture of credit previously claimed against tax in prior taxable years is an addition to tax in the taxable year in which the property is disposed of or ceases to qualify. The addition to tax does not affect the computation of limitations used to determine the amount of investment tax credit or any other Idaho credit that may be claimed in the year of the recapture.(4-6-23)

03.Unitary Taxpayers. The corporation that earned the credit is responsible for the recapture or recomputation of the credit when the property ceases to qualify.(4-6-23)

04.Applicable Recapture Percentages. For qualified business property placed in service after December 31, 1990, the recapture amount is computed by multiplying the credit earned by the applicable recapture percentage. The length of time the asset qualifies determines the recapture percentage as follows:(4-6-23)

a.If less than one (1) year, use one hundred percent (100%);(4-6-23)

b.If more than one (1) year but less than two (2) years, use eighty percent (80%);(4-6-23)

c.If more than two (2) years but less than three (3) years, use sixty percent (60%);(4-6-23)

d.If more than three (3) years but less than four (4) years, use forty percent (40%);(4-6-23)

e.If more than four (4) years but less than five (5) years, use twenty percent (20%).(4-6-23)

IDAPA 35.01.01.716 Idaho Investment Tax Credit: Record-Keeping Requirements (rule 716)

Information Required. Each taxpayer must retain and make available, on request, records for each item of property included in the computation of the investment tax credit claimed on an income tax return subject to examination. The records must include all of the following:(4-6-23)

a.A description of the property;(4-6-23)

b.The asset number assigned to the item of property, if applicable;(4-6-23)

c.The acquisition date and date placed in service;(4-6-23)

d.The basis of the property;(4-6-23)

e.The class of the property for recovery property or the estimated useful life for nonrecovery property;(4-6-23)

f.The designation as new or used property;(4-6-23)

g.The location and utilization (the usage both in and outside Idaho) of the property;(4-6-23)

h.The retirement, disposition, or date transferred out of Idaho, or date no longer used in Idaho, if applicable; and(4-6-23)

i.The reason for acquisition if acquired prior to January 1, 1995.(4-6-23)

02.Accounting Records Subject to Examination. Accounting records that may need to be examined to document acquisition, disposition, location, and utilization of assets include the following:(4-6-23)

a.Accounting documents that contain asset and account designations and descriptions. These documents include a chart of accounts, the accounting manual, controller’s manual, or other documents containing this information.(4-6-23)

b.Asset location records including asset directories, asset registers, insurance records, property tax records, or similar asset inventory documents.(4-6-23)

c.Records verifying ownership including purchase contracts and cancelled checks.(4-6-23)

d.Invoices, shipping documents, and similar documents reflecting the transfer of assets in and out of

e.Purchase orders, authorizations for expenditures or other records that identify the reason for acquisition for property acquired prior to January 1, 1995.(4-6-23)

f.Log books measuring the use of property used both in and outside Idaho. These logs must be maintained for each item of property on which investment tax credit is claimed. These logs should measure use of property in accordance with the most accurate method for measuring the extent of use in Idaho. For example, use in Idaho of trucks, trailers, locomotives, and railcars are to be calculated according to actual mileage in and outside

g.A system that verifies that property on which the investment tax credit was claimed continues to maintain its status as Idaho qualifying property throughout the recapture period.(4-6-23)

03.Failure to Maintain Adequate Records. Failure to maintain any of the records required by this

04.Unitary Taxpayers. Corporations claiming investment tax credit must provide a calculation of the credit earned and used by each member of the combined group. The schedule must clearly identify shared credit and the computation of any credit carryovers.(4-6-23)

IDAPA 35.01.01.717 (Reserved)

IDAPA 35.01.01.719 Idaho Investment Tax Credit: Property Tax Exemption in Lieu of (rule 719)

In General. Beginning with calendar year 2003, a qualifying taxpayer may elect a two (2) year property tax exemption on personal property placed in service during the year. Property placed in service prior to January 1, 2003, does not qualify for the exemption. The personal property must be qualified investment as defined in Section 63-3029B, Idaho Code, and Rules 710 through 716 of these rules. If the property tax exemption is elected on an item of personal property, the taxpayer may not earn the investment tax credit on that item. The election is irrevocable.(4-6-23)

02.Terms. As used in this rule:(4-6-23)

a.Qualifying Taxpayer. A taxpayer must meet both of the following requirements to qualify for the property tax exemption on personal property.(4-6-23)

i.The taxpayer’s rate of charge or rate of return must not be regulated or limited by federal or state law. For example, if a corporation’s rate of return is set by the Public Utilities Commission, that corporation is to not be eligible to claim the property tax exemption on any personal property it may place in service. The corporation may claim investment tax credit on the property if the property is qualified investment under Section 63-3029B, Idaho Code. Each corporation included in a unitary group is to determine whether its rate of charge or rate of return is regulated or limited by federal or state law based solely on its own activities.(4-6-23)

ii.The taxpayer must have had negative Idaho taxable income in the second preceding taxable year.

b.Second Preceding Taxable Year. The term second preceding taxable year means the second preceding taxable year from the taxable year in which the property is placed in service.(4-6-23)

03.Negative Idaho Taxable Income in Second Preceding Taxable Year.(4-6-23)

a.Net Operating Loss Carryovers and Carrybacks. Negative Idaho taxable income in the second preceding taxable year is to be determined prior to the application of any Idaho net operating loss carryforwards or carrybacks.(4-6-23)

b.Taxable year, for purposes of this calculation, includes a short taxable year as defined by the Internal Revenue Code.(4-6-23)

c.Unitary Taxpayers. Each corporation included in a unitary combined group is to use its Idaho taxable income, as determined pursuant to Section 63-3027, Idaho Code, to determine whether it had negative Idaho taxable income in the second preceding taxable year. See Rule 365 of these rules for more information on how unitary corporations determine their Idaho taxable income.(4-6-23)

d.Pass-Through Entities. A taxpayer who is a partnership or an S corporation does not qualify for the property tax exemption unless the total of its net business income apportioned to Idaho and its nonbusiness income or loss allocated to Idaho is negative for the second preceding taxable year.(4-6-23)

e.Return Not Filed. If a taxpayer has not filed an Idaho income tax return for the second preceding taxable year so that the loss can be verified, the taxpayer is not entitled to the exemption.(4-6-23)

04.Used Property Limitation.(4-6-23)

a.In General. The cost of used property that a taxpayer may take into account for any taxable year in computing qualified investment does not exceed one hundred fifty thousand dollars ($150,000). This includes the cost of property the taxpayer placed in service during the taxable year and also his share of the cost of property placed in service during the taxable year by a partnership, S corporation, estate or trust. Because property must be qualified investment to qualify for the property tax exemption, the taxpayer is limited to one hundred fifty thousand dollars ($150,000) for purposes of determining the property tax exemption.(4-6-23)

b.Selection of Items of Used Property. If the cost of the taxpayer’s used property eligible for the investment tax credit exceeds the used property limitation, the taxpayer must select the particular items of used property the cost of which is to be taken into account in computing qualified investment. When the taxpayer selects a particular item, the entire cost or the taxpayer’s share of cost of the particular item must be taken into account unless the one hundred fifty thousand dollar ($150,000) limitation is exceeded.(4-6-23)

c.Electing Property Tax Exemption on Selected Used Property Items. Once the taxpayer has selected the particular items of used property, the cost of which is to be taken into account in computing qualified investment, the taxpayer is to determine whether he may elect the property tax exemption on the items selected. If an item qualifies as personal property and the taxpayer had a negative Idaho taxable income in the second preceding taxable year, the taxpayer may elect to claim the property tax exemption on the item in lieu of earning the investment tax credit.(4-6-23)

IDAPA 35.01.01.720 Credit for Idaho Research Activities: in General (rule 720)

Definitions. The Idaho credit is computed using the same definitions of qualified research expenses, qualified research, basic research payments, and basic research as are found in Section 41, Internal Revenue Code, except only the amounts related to research conducted in Idaho qualify for the Idaho credit. If an expense does not qualify for the federal credit under Section 41, Internal Revenue Code, it will not qualify for purposes of the Idaho credit.(4-6-23)

02.Limitations. The credit for Idaho research activities allowable in any taxable year is limited as follows:(4-6-23)

a.Tax Liability. The total amount of any credit for Idaho research activities claimed during a taxable year may not exceed one hundred percent (100%) of the tax, after allowing all other income tax credits that may be claimed before the credit for Idaho research activities, regardless of whether the credit for Idaho research activities results from a carryover earned in prior years, the current year, or both. See Rule 799 of these rules for the priority order for nonrefundable credits.(4-6-23)

b.Unitary Taxpayers. Limitations apply to each taxpayer according to its own tax liability. Each

03.Short Taxable Year Calculations. Short taxable year calculations provided in Section 41, Internal Revenue Code, and related regulations are used to compute the Idaho credit if the taxpayer must use short taxable year calculations for purposes of computing the federal credit. (4-6-23)

IDAPA 35.01.01.721 Credit for Idaho Research Activities: Elections (rule 721)

01.Election to Be Treated as a Start-Up Company. Regardless of whether a taxpayer qualifies as a start-up company for purposes of the federal credit for increasing research activities under Section 41, Internal Revenue Code, a taxpayer may elect to be treated as a start-up company for the credit for Idaho research activities.

a.The election once made is irrevocable.(4-6-23)

b.The election is made by checking the appropriate box on Form 67.(4-6-23)

c.A taxpayer who makes the election under Section 63-3029G, Idaho Code, to be treated as a start-up company must use the fixed-base percentage that would be used by the taxpayer if the taxpayer had qualified as a start-up company for purposes of the federal credit under Section 41, Internal Revenue Code.(4-6-23)

02.Unitary Sharing. A corporation included as a member of a unitary group may elect to share the credit for Idaho research activities it earns but does not use with other members of the unitary group. Before the corporation may share the credit, it must claim the credit for Idaho research activities to the extent allowable against its tax liability. The credit available to be shared is the amount of credit carryover and credit earned for the taxable year that exceeds the limitation provided in Section 63-3029G(3), Idaho Code. The limitation is applied against the tax computed for the corporation that claims the credit. Credit shared with another member of the unitary group reduces the carryforward.(4-6-23)

IDAPA 35.01.01.722 (Reserved)

IDAPA 35.01.01.723 Credit for Idaho Research Activities: Record-Keeping Requirements

(RULE 723).

Information Required. Each taxpayer must retain and make available, on request, records for each item included in the computation of the credit for Idaho research activities claimed on an Idaho income tax return.

The records must include all of the following:(4-6-23)

a.Verification that the research was conducted in Idaho;(4-6-23)

b.Verification that wages included in the computation were for qualified service performed by an employee in Idaho;(4-6-23)

c.Verification that supplies included in the computation were used for research conducted in Idaho;

d.Verification that contract research expenses were for research conducted in Idaho;(4-6-23)

e.Verification that the research activities meet the definition of qualified research; and(4-6-23)

f.Verification that the amounts included in the Idaho computation are includable in the computation of the federal credit allowed by Section 41, Internal Revenue Code.(4-6-23)

02.Failure to Maintain Adequate Records. Failure to maintain any of the records required by this

03.Unitary Taxpayers. Corporations claiming the credit for Idaho research activities must provide a calculation of the credit earned and used by each member of the combined group. The schedule must clearly identify shared credit and the computation of any credit carryovers.(4-6-23)

IDAPA 35.01.01.724 (Reserved)

IDAPA 35.01.01.730 Credit for Contributions to Idaho Youth Facilities, Rehabilitation

FACILITIES AND NONPROFIT SUBSTANCE ABUSE CENTERS (RULE 730).

Section 63-3029C, Idaho Code Qualified Contributions. Contributions must be made in cash or in kind during the taxable year the credit is claimed. Unpaid pledges do not qualify as contributions. Fees for services provided, room and board, and similar charges are not contributions.(4-6-23)

02.Pass-Through Entities. The credit may be earned by a partnership, S corporation, estate or trust and passed through to the partner, shareholder, or beneficiary.(4-6-23)

03.Effect on Itemized Deductions. The credit allowed does not reduce the amount of charitable contributions that may be included in itemized deductions.(4-6-23)

IDAPA 35.01.01.731 (Reserved)

IDAPA 35.01.01.750 Broadband Equipment Investment Credit: in General (rule 750)

Section 63-3029I, Idaho Code Unitary Taxpayers. Limitations apply to each taxpayer according to its own tax liability. Each

02.Transferred Credit. Limitations apply to each transferee as if the transferee had earned the credit.

i.The fourteen (14) year carryover period provided by section 63-3029I(7), Idaho Code, extends throughout the fourteen (14) taxable years following the year in which the equipment was installed. The fourteen (14) year carryover period begins to run regardless of whether the taxpayer has sought and received approval from the Idaho public utilities commission (PUC).(4-6-23)

ii.Once a taxpayer has received the approval order from the PUC, the broadband tax credit may be claimed or transferred. If the statute of limitations has expired for filing a return to claim the credit for the taxable year of the installation, the taxpayer cannot claim any credit for that taxable year, but must calculate how much of the credit the taxpayer could have used to determine the amount of credit available to carry forward pursuant to section 63-3029I(7), Idaho Code.(4-6-23)

iii.Example: A calendar year filer installed qualifying equipment on July 20, 2001. However, it was not until 2013 that the taxpayer sought and received the approval order from the PUC. The fourteen (14) year carryover period already began to run based on the installation date and will expire at the end of the 2015 taxable year. On March 10, 2013 the taxpayer is preparing his tax returns and considering how much broadband credit is available and to which taxable years it could be applied to. The taxpayer can file an amended return to claim the credit starting with taxable year 2009 (prior years would be out of the statute of limitations for filing an amended return assuming all returns had been timely filed and no other special circumstances had held the period open). The taxpayer must look back to taxable year 2001 (the year of installation) to see how much credit the taxpayer could have used in each taxable year up to 2009 to determine how much credit carryover amount is still available pursuant to the carryover limitations of section 63-3029I(7), Idaho Code. The taxpayer must use up or transfer any unused credit before taxable year 2016; after taxable year 2015, the carry forward period will expire and any unused credit will no longer be available for the taxpayer to apply or transfer.(4-6-23)

03.Taxpayers Entitled to the Credit. Rule 711 of these rules will apply to the broadband equipment investment credit except that limitations referenced in Subsection 711.01 of these rules will be those limitations as provided in Section 63-3029I, Idaho Code.(4-6-23)

04.Pass-Through Entities. The credit may be earned by a partnership, S corporation, estate, or trust and passed through to the partner, shareholder, or beneficiary. See Rule 785 of these rules for the method of attributing the credit, for pass-through entities paying tax, and the application of limitations on pass-through credits.

IDAPA 35.01.01.751 (Reserved)

IDAPA 35.01.01.753 Broadband Equipment Investment Credit: Record-Keeping Requirements

(RULE 753).

Section 63-3029I, Idaho Code Information Required. Each taxpayer must retain and make available, on request, records for each item of property included in the computation of the broadband equipment investment credit claimed on an income tax return subject to examination. The records must include all of the following:(4-6-23)

a.The order from the Idaho Public Utilities Commission confirming that the installed equipment is qualified broadband equipment.(4-6-23)

b.A description of the property;(4-6-23)

c.The asset number assigned to the item of property, if applicable;(4-6-23)

d.The acquisition date and date placed in service;(4-6-23)

e.The basis of the property; and(4-6-23)

f.The retirement, disposition, or date transferred out of Idaho, or date no longer used in Idaho, if applicable.(4-6-23)

02.Accounting Records Subject to Examination. Accounting records that may need to be examined to document acquisition, disposition, location, and utilization of assets include the following:(4-6-23)

a.Source documents supporting the application to the Idaho Public Utilities Commission;(4-6-23)

b.Accounting documents that contain asset and account designations and descriptions. These documents include a chart of accounts, the accounting manual, controller’s manual, or other documents containing this information;(4-6-23)

c.Asset location records including asset directories, asset registers, insurance records, property tax records, or similar asset inventory documents;(4-6-23)

d.Records verifying ownership including purchase contracts and cancelled checks;(4-6-23)

e.Invoices, shipping documents, and similar documents reflecting the transfer of assets in and out of Idaho; and(4-6-23)

f.A system that verifies that property on which the broadband equipment investment credit was claimed continues to maintain its status as Idaho qualifying property throughout the recapture period.(4-6-23)

03.Failure to Maintain Adequate Records. Failure to maintain any of the records required by this

04.Unitary Taxpayers. Corporations claiming broadband equipment investment credit must provide a calculation of the credit earned and used by each member of the combined group. The schedule must clearly identify shared credit and the computation of any credit carryovers.(4-6-23)

05.Credit Transferred. A taxpayer that transfers the broadband equipment investment credit is to continue to be subject to the record-keeping requirements of this rule for as long as the credit may be carried over by the transferee or until further assessment or deficiency determinations are barred by a period of limitation, whichever is longer.(4-6-23)

IDAPA 35.01.01.754 (Reserved)

IDAPA 35.01.01.771 Grocery Credit: Taxable Years Beginning After December 31, 2007 (rule 771)

Section 63-3024A, Idaho Code Residents.(4-6-23)

a.The additional twenty dollar ($20) credit may not be claimed for other dependents who are age sixty-five (65) or older.(4-6-23)

02.Part-Year Residents. A part-year resident is entitled to a prorated credit based on the number of months he was domiciled in Idaho during the taxable year. For purposes of this rule, a fraction of a month exceeding fifteen (15) days is treated as a full month. If the credit exceeds his tax liability, the part-year resident is not entitled to a refund.(4-6-23)

03.Circumstances Causing Ineligibility. A resident or part-year resident individual is not eligible for the credit for the month or part of the month for which the individual:(4-6-23)

a.Received assistance under the federal food stamp program; or(4-6-23)

b.Wa s incarcerated.(4-6-23)

04.Nonresidents. A nonresident is not entitled to the credit even though the individual may have been employed in Idaho for the entire year.(4-6-23)

05.Members of the Uniformed Services. A member of the uniformed services who is:(4-6-23)

a.Domiciled in Idaho is entitled to this credit;(4-6-23)

b.Residing in Idaho but who is a nonresident pursuant to the Servicemembers Civil Relief Act is not entitled to this credit.(4-6-23)

06.Spouse or Dependents of Members of the Uniformed Services. Beginning on January 1, 2009, a spouse of a nonresident member of the uniformed services stationed in Idaho who has the same domicile as the military service member’s home of record and who is residing in Idaho solely to be with the servicemember is a nonresident and is not entitled to the grocery credit. A spouse who is domiciled in Idaho is entitled to the credit. The domicile of a dependent child is presumed to be that of the nonmilitary spouse.(4-6-23)

IDAPA 35.01.01.772 (Reserved)

IDAPA 35.01.01.775 Credit for Live Organ Donation Expenses (rule 775)

Section 63-3029K, Idaho Code Live Organ Donation Expenses. Qualifying expenses is to be directly related to a live organ donation by the taxpayer or by a dependent of the taxpayer and includes the following:(4-6-23)

a.The unreimbursed cost of travel paid by the taxpayer to and from the place where the donation operation occurred.(4-6-23)

b.Unreimbursed lodging expenses paid by the taxpayer.(4-6-23)

c.Wages or other compensation lost because of the taxpayer’s absence from work during the donation procedure and convalescence.(4-6-23)

IDAPA 35.01.01.776 (Reserved)

IDAPA 35.01.01.785 Credits: Pass-Through Entities (rule 785)

Section 63-3029(a), Idaho Code In General. A credit earned by a partnership, S corporation, estate, or trust generally is claimed on the income tax returns of the partners, shareholders, or beneficiaries of the entity.(4-6-23)

a.Partnerships. A credit passes through to a partner based on that partner’s distributive share of partnership profits.(4-6-23)

b.S Corporations. A credit passes through to a shareholder based on that shareholder’s pro rata share of income or loss.(4-6-23)

c.Estates and Trusts. A credit passes through to a beneficiary in the same ratio that income is allocable to that beneficiary.(4-6-23)

d.Idaho credits may not pass through to partners or owners based on special allocations.(4-6-23)

02.Limitations.(4-6-23)

a.In General. Credits claimed on a partner’s, shareholder’s, or beneficiary’s tax return may not exceed the limitations imposed by statute or rule.(4-6-23)

03.Carryovers. Carryovers of credit are allowed to the partner, shareholder, or beneficiary to the extent provided by statute or rule.(4-6-23)

04.Different Taxable Year Ends. If a pass-through entity has a taxable year end different from that of a partner, shareholder, or beneficiary, the credit is available in the same taxable year that income or loss from that entity is reported.(4-6-23)

05.Information Provided by a Pass-Through Entity. The pass-through entity is to prepare and distribute to each partner, shareholder, or beneficiary a schedule detailing the proportionate share of each credit earned and any recapture that is required. Copies of these schedules are to be attached to the pass-through entity’s Idaho income tax return or information return for the taxable year that the credit is earned and to each return on which the credit is claimed.(4-6-23)

06.Pass-Through Entities That Pay Tax.(4-6-23)

a.A pass-through entity may apply and may recapture credits that generally pass through to the partner, shareholder, or beneficiary for whom the pass-through entity is paying the tax. For example, Idaho investment tax credit earned that would have passed through to the owner or beneficiary could be claimed by the pass-through entity subject to the applicable limitations. Limitations based on the tax liability apply to each owner’s or beneficiary’s tax liability being paid by the pass-through entity.(4-6-23)

b.The partner, shareholder or beneficiary is responsible for the recapture or recomputation of credits passed through to the partner, shareholder, or beneficiary.(4-6-23)

c.Carryovers that exist after a pass-through entity offsets the tax with credit available to that partner, shareholder or beneficiary, remain a carryover of the partner, shareholder or beneficiary.(4-6-23)

07.Examples. Available at Income Tax Rules Examples.(4-6-23)

IDAPA 35.01.01.786 (Reserved)

IDAPA 35.01.01.790 Transfer of Credit: in General (rule 790)

Terms. For purposes of Rules 790 through 795 of these rules, the following terms have the stated meanings:(4-6-23)

a.Transferor. The taxpayer who earns the credit and sells, conveys, or transfers the credit to another taxpayer are referred to as the transferor.(4-6-23)

b.Transferee. The taxpayer who receives the credit from the transferor or intermediary is referred to as the transferee.(4-6-23)

IDAPA 35.01.01.791 Transfer of Credit: Notification of Intended Transfer (rule 791)

Timing of Notification. A taxpayer who intends to transfer qualified credit is to notify the Tax Commission in writing of its intent to transfer the credit at least sixty (60) days prior to the date of the transfer. A transfer may not take place prior to the Tax Commission providing its response as to the amount of credit available and the years the credit may be carried forward.(4-6-23)

02.Information Required. A transferor or intermediary is to notify the Tax Commission by submitting the following information on a form prescribed by the Tax Commission:(4-6-23)

a.Name, address, and federal employer identification number of the transferor or intermediary;

b.Name, address, and federal employer identification number of the transferee;(4-6-23)

c.Type of credit to be transferred;(4-6-23)

d.Amount of credit to be transferred;(4-6-23)

e.Date of intended transfer;(4-6-23)

f.Signature of authorized individual for transferor or intermediary; and(4-6-23)

g.A copy of the Idaho Form 68, Idaho Broadband Equipment Investment Credit and required schedules for each tax year the credit being transferred was earned.(4-6-23)

IDAPA 35.01.01.792 (Reserved)

IDAPA 35.01.01.793 Transfer of Credit: Transferee (rule 793)

01.Tax Year Credit Available. A transferee may first claim the transferred credit on an income tax return originally filed during the calendar year in which the transfer takes place. However, if the transferee did not claim the transferred credit on his original return filed during the calendar year in which the transfer takes place, he may not amend such return to claim the credit for that tax year.(4-6-23)

02.Carryover Period. If a credit is transferred, the transferee is entitled to any remaining carryover period that would have been allowed to the transferor or intermediary had the credit not been transferred. The Tax Commission is to verify the carryover period. The carryover period approved applies to the taxable year of the transferee that begins in the calendar year in which the transferor’s taxable year begins.(4-6-23)

IDAPA 35.01.01.794 (Reserved)

IDAPA 35.01.01.799 Priority Order of Credits and Adjustments to Credits (rule 799)

Section 63-3029P, Idaho Code Tax Liability. Tax liability is the tax imposed by Sections 63-3024, 63-3025, and 63-3025A, Idaho

02.Nonrefundable Credits. A nonrefundable credit is allowed only to reduce the tax liability. A nonrefundable credit not absorbed by the tax liability is lost unless the statute authorizing the credit includes a carryover provision. Nonrefundable credits apply against the tax liability in the following order of priority: (4-6-23)

a.Credit for taxes paid to other states as authorized by Section 63-3029, Idaho Code;(4-6-23)

b.For part-year residents only, the grocery credit as authorized by Section 63-3024A, Idaho Code;

c.Credit for contributions to Idaho educational institutions as authorized by Section 63-3029A, Idaho

d.Investment tax credit as authorized by Section 63-3029B, Idaho Code;(4-6-23)

e.Credit for contributions to Idaho youth facilities, rehabilitation facilities, and nonprofit substance abuse centers as authorized by Section 63-3029C, Idaho Code;(4-6-23)

f.Credit for equipment using postconsumer waste or postindustrial waste as authorized by Section 63-3029D, Idaho Code;(4-6-23)

g.Promoter-sponsored event credit as authorized by Section 63-3620C, Idaho Code;(4-6-23)

h.Credit for Idaho research activities as authorized by Section 63-3029G, Idaho Code;(4-6-23)

i.Broadband equipment investment credit as authorized by Section 63-3029I, Idaho Code; and

j.Small employer investment tax credit as authorized by Section 63-4403, Idaho Code.(4-6-23)

k.Small employer real property improvement tax credit as authorized by Section 63-4404, Idaho

l.Small employer new jobs tax credit as authorized by Section 63-4405, Idaho Code.(4-6-23)

m.Credit for live organ donation expenses as authorized by Section 63-3029K, Idaho Code. (4-6-23)

n.Idaho child tax credit as authorized by Section 63-3029L, Idaho Code.(4-6-23)

o.Credit for employer contributions to employee’s Idaho college savings program account as authorized by Section 63-3029M, Idaho Code.(4-6-23)

03.Adjustments to Credits.(4-6-23)

a.Adjustments to the amount of a credit earned is determined pursuant to the law applicable to the taxable year in which the credit was earned.(4-6-23)

b.Adjustments to the amount of a credit earned may be made even though the taxable year in which the credit was earned is closed due to the statute of limitations. Such adjustments to the earned credit also applies to any taxable years to which the credit was carried over.(4-6-23)

c.If the taxable year in which the credit was earned or carried over to is closed due to the statute of limitations, any adjustments to the credit earned does not result in any tax due or refund for the closed taxable years.

However, the adjustments may result in tax due or a refund in a carryover year if the carryover year is open to the statute of limitations.(4-6-23)

IDAPA 35.01.01.800 Valid Income Tax Returns (rule 800)

Section 63-3030, Idaho Code

01.Requirements of a Valid Income Tax Return. In addition to the requirements set forth in IDAPA 35.02.01, “Tax Commission Administration and Enforcement Rules,” Rule 150, an income tax return is to meet the requirements set forth in this rule. Those that fail to meet these requirements are invalid. They may be rejected and returned to the taxpayer to be completed according to these requirements and resubmitted to the Tax Commission. A taxpayer who does not file a valid income tax return is considered to have filed no return.(4-6-23)

02.Copy of Federal Return Required. A taxpayer is to include with the Idaho return a complete copy of the federal income tax return including all forms, schedules and attachments.(4-6-23)

03.Verification of Idaho Income Tax Withheld. A taxpayer who files an Idaho individual income tax return that is submitted on paper and reports Idaho income tax withheld is to attach appropriate Forms W-2 and 1099 and other information forms that verify the amount of the Idaho income tax withheld and claimed on the Idaho income tax return. Returns filed electronically is to include the W-2 and 1099 information in the electronic record transmitted.(4-6-23)

IDAPA 35.01.01.801 Persons Required to File Income Tax Returns (rule 801)

Section 63-3030, Idaho Code In General. Persons who meet the filing requirements under Section 63-3030, Idaho Code, will file Idaho income tax returns unless otherwise provided in the Idaho Income Tax Act or by federal law.(4-6-23)

02.Individuals Who Make Elections Under Section 63-3022L, Idaho Code. For taxable years beginning prior to January 1, 2012, if an individual partner, member, shareholder, or beneficiary is qualified and makes an election under Section 63-3022L, Idaho Code, for the entity to pay the tax attributable to his income from the entity, such individual will not be required to file an Idaho individual income tax return for that taxable year.

03.Corporations Included in a Unitary Group. A unitary group of corporations may file one (1)

Idaho corporate income tax return for all the corporations of the unitary group that are required to file an Idaho income tax return. Use of the group return precludes the need for each corporation to file its own Idaho corporate income tax return.(4-6-23)

04.Taxpayers Protected Under Public Law 86-272. A taxpayer whose Idaho business activities fall under the protection of Public Law 86-272 is not required to file an Idaho income tax return since the taxpayer is exempt from the tax imposed under the Idaho Income Tax Act. If a taxpayer is a member of a unitary group, it will be included in the combined report although it is exempt from the income tax. The taxpayer’s property, payroll, and sales will be included in the computation of the group factor denominators and its business income will be included in the computation of apportionable income for the unitary group.(4-6-23)

IDAPA 35.01.01.802 (Reserved)

IDAPA 35.01.01.805 Joint Returns (rule 805)

Sections 63-3031, 32-201, and 32-209, Idaho Code

a.If a married couple files a joint return and the due date for filing a separate return has expired for either spouse, separate returns may not be filed thereafter.(4-6-23)

02.Resident Aliens or United States Citizens Married to Nonresident Aliens. A United States citizen or resident married to a nonresident alien may elect to treat the spouse as a resident alien allowing them to file a joint return. In this case they are taxed on their worldwide income. The individuals must be able to provide all records and information necessary to determine their tax liability. A statement declaring the election is to be attached to the return for the first taxable year for which the election is to apply. In addition, the statement will include the name, address, and taxpayer identification number of each spouse, and is to be signed by both individuals making the election.(4-6-23)

IDAPA 35.01.01.806 (Reserved)

IDAPA 35.01.01.810 Time for Filing Income Tax Returns (rule 810)

Section 63-3032, Idaho Code A fifty-two fifty-three (52-53) week year is considered to end on the last day of the calendar month ending nearest to the last day of that taxable year.(4-6-23)

IDAPA 35.01.01.811 (Reserved)

IDAPA 35.01.01.820 Corporate Estimated Payments: in General (rule 820)

Estimated Tax. The term estimated tax means the corporation’s anticipated tax as imposed by this Chapter including the permanent building fund tax, plus any recapture of Idaho income tax credits, less the sum of any income tax credits. Estimated payments and non-income tax credits are not included as a credit.(4-6-23)

02.Computation of Estimated Payments.(4-6-23)

a.The tax required to be reported on the preceding year’s return and the tax required to be paid on the current year’s return means Idaho taxable income multiplied by the corporate income tax rate with a minimum of twenty dollars ($20), plus the permanent building fund tax, plus the recapture of income tax credits, less income tax credits excluding estimated payments.(4-6-23)

b.An estimated payment is not required if an Idaho return was not required for the previous taxable

03.Revised Income Estimate. If, after making one or more estimated payments for a taxable year, a corporation makes a new estimate of its current year income, it recomputes its estimated tax. If the corporation has paid its new estimated tax in prior estimated payments, no payment is due.(4-6-23)

04.Net Operating Loss or Capital Loss Carryover. The allowable net operating loss carryover or capital loss carryover is to be deducted from income for the period before the estimated tax is computed.(4-6-23)

IDAPA 35.01.01.821 Corporate Estimated Payments: Payments (rule 821)

Underpayments. A payment of estimated tax is to be applied to previous estimated payments of estimated tax in the order in which the estimated payments were required to be paid. To the extent the payment exceeds previous underpayments, it applies to the estimated payment then due.(4-6-23)

02.Overpayments.(4-6-23)

a.If the estimated payments exceed the actual tax due, the overpayment may be claimed as a credit against the next payment only to the extent it exceeds all underpayments of prior estimated payments.(4-6-23)

b.The overpayment is to be applied to deficiencies of tax, penalties, and interest prior to refund or application to a subsequent year’s estimated payment or tax liability.(4-6-23)

c.A refund or credit may not be made to a corporation that fails to file its Idaho income tax return within three (3) years from the due date of the return for which it made the estimated payments.(4-6-23)

03.Obligation to File Returns. The payment of estimated tax does not relieve a corporation of the obligation to file a return when due pursuant to the Idaho Income Tax Act. An extension of time is not allowed for payment of estimated taxes. Making estimated payments as required in Section 63-3036A, Idaho Code, does not relieve the taxpayer of the requirement to pay the appropriate amount of tax with an application for extension of time to file or with the original return.(4-6-23)

IDAPA 35.01.01.822 Corporate Estimated Payments: Annualized Income Installment Method

(R ULE 822).

a.If a corporation uses the annualized income installment method for federal purposes and is required to make estimated payments for Idaho purposes, the corporation may use that method to compute its Idaho estimated tax. If a corporation does not use the annualized income installment method for federal purposes, the corporation may not use that method for Idaho purposes.(4-6-23)

b.See Section 6655, Internal Revenue Code, for the determination of annualized income.(4-6-23)

02.Required Installment. The required annualized income installment is the applicable percentage of the tax computed on the annualized income less the aggregate amount of any prior required installments for the reporting period. The applicable percentages for Idaho are:(4-6-23)

a.Twenty-two and one-half percent (22.5%) for the first period;(4-6-23)

b.Forty-five percent (45%) for the second period;(4-6-23)

c.Sixty-seven and one-half percent (67.5%) for the third period; and(4-6-23)

d.Ninety percent (90%) for the fourth period.(4-6-23)

03.Computation of Tax. The tax computed on the annualized income includes the annualized income multiplied by the corporate income tax rate, plus the permanent building fund tax, plus recapture of investment tax credit, less any credits excluding estimated payments.(4-6-23)

IDAPA 35.01.01.823 Corporate Estimated Payments: Shor

T TAXABLE YEAR (RULE 823).

If a short taxable year ends before an estimated payment due date, remaining estimated payments is to be made on the fifteenth day of the last month of the short taxable year. No estimated payment is required if the short taxable year is less than four (4) months or if the corporation does not meet the requirements to make an estimated payment before the first day of the last month in the short taxable year. Examples available at Income Tax Rules Examples. (4-6-23)

IDAPA 35.01.01.824 Corporate Estimated Payments: Miscellaneous Provisions (rule 824)

Unitary Groups Filing Group Returns.(4-6-23)

a.Each corporation included in a group return that is required to make estimated payments separately computes its estimated tax.(4-6-23)

b.Estimated payments is to be made using the name and the federal employer identification number of the corporation whose name will be on the Idaho corporate income tax return.(4-6-23)

02.S Corporations. An S corporation is subject to Section 63-3036A, Idaho Code, limited to its tax on net recognized built-in gains, excess net passive income and from recapture of Idaho income tax credits.(4-6-23)

03.Tax-Exempt Organizations. A tax-exempt organization is subject to Section 63-3036A, Idaho Code, limited to its tax on unrelated business income.(4-6-23)

IDAPA 35.01.01.825 Corporate Estimated Payments: Interest

ON UNDERPAYMENT (RULE 825).

Section 63-3046A, Idaho Code In General. If a taxpayer is required to pay estimated taxes as provided in Section 63-3036A, Idaho Code, and fails to pay the amount of estimated taxes due, interest is due on the underpaid estimated taxes.

02.Net Operating Loss and Capital Loss Carrybacks. If the tax due for the taxable year is reduced after the application of a net operating loss carryback or a capital loss carryback, the interest on underpayment of estimated tax will not be recomputed.(4-6-23)

IDAPA 35.01.01.826 (Reserved)

IDAPA 35.01.01.830 Information Returns (rule 830)

Section 63-3037, Idaho Code In General. Information returns are not required to be filed with the Tax Commission except as follows:(4-6-23)

a.Form 1098, Mortgage Interest Statement, if the property was located in Idaho.(4-6-23)

b.Form 1099-A, Acquisition or Abandonment of Secured Property, if the property was located in

c.Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, if the property was located in Idaho or the service was performed in Idaho.(4-6-23)

d.Form 1099-C, Cancellation of Debt, if the secured property was located in Idaho.(4-6-23)

e.Form 1099-MISC, Miscellaneous Income, if it was issued for transactions related to property located or utilized in Idaho or for services performed in Idaho.(4-6-23)

f.Form 1099-R, Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRA’s, Insurance Contracts, etc., if Idaho income tax was withheld.(4-6-23)

g.Form 1099-S, Proceeds From Real Estate Transactions, if it was issued for transactions related to property located in Idaho.(4-6-23)

h.Form W-2G, Certain Gambling Winnings, if the gambling took place in Idaho.(4-6-23)

i.Form 1099-NEC, Nonemployee Compensation, if it was issued for services performed in Idaho.

j.Form 1042-S, Foreign Person’s U.S. Source Income Subject to Withholding, if the income is from Idaho sources.(4-6-23)

02.Submitting Returns. Information returns must be submitted to the Tax Commission through electronic filing or on a paper copy of federal Form 1099.(4-6-23)

03.Due Date of Information Returns. Information returns are made on a calendar year basis. The due date for information returns submitted through electronic filing or on paper is the last day of February following the close of the calendar year.(4-6-23)

04.Voluntary Withholding. Each person who withholds Idaho income tax from amounts reported on information returns required by Section 63-3037, Idaho Code, must:(4-6-23)

a.Obtain an Idaho withholding account number as required by Rule 870 of these rules; and (4-6-23)

b.Submit an annual reconciliation return to the Tax Commission and comply with the requirements provided for filing of annual reconciliation returns as discussed in Rule 872 of these rules. The reconciliation return must report amounts paid during the preceding calendar year and reconcile the state income tax withheld with the tax remitted for the preceding calendar year. The reconciliation return must be filed on or before the last day of January.

IDAPA 35.01.01.831 (Reserved)

IDAPA 35.01.01.855 Permanent Building Fund Tax (rule 855)

Sections 63-3082 through 63-3087, Idaho Code Corporations Included in a Group Return. The permanent building fund tax applies to each member of a unitary group transacting business in Idaho, authorized to transact business in Idaho, or having income attributable to Idaho and included in a group return, except as provided in Subsection 855.05 of this rule.(4-6-23)

02.Inactive or Nameholder Corporations. An inactive or nameholder corporation that files Form 41 to pay the twenty dollar ($20) minimum tax must pay the permanent building fund tax.(4-6-23)

03.Taxpayers Protected Under Public Law 86-272. The permanent building fund tax does not apply to a taxpayer whose Idaho business activities fall under the protection of Public Law 86-272, since the taxpayer is exempt from the tax imposed under the Idaho Income Tax Act and is not required to file an income tax return.

IDAPA 35.01.01.856 (Reserved)

IDAPA 35.01.01.860 Donations to Trust Accounts (rule 860)

Sections 63-3067A, 63-3067B, and 63-3067D, Idaho Code. A donation to a trust account may not be withdrawn or reduced once the return or amended return on which it was made is filed.(4-6-23)

IDAPA 35.01.01.861 (Reserved)

IDAPA 35.01.01.870 Requirements of an Idaho Withholding Account Number (rule 870)

If a business is sold, the new employer is to apply for a new withholding account number and file separate returns and W-2s. If a change in the form of doing business requires a new federal employer identification number, the new entity is to apply for a new withholding account number. Neither entity should report wages paid by the other entity, nor use the other entity’s withholding account number.(4-6-23)

IDAPA 35.01.01.871 State Income Tax Withholding Required (rule 871)

Services Performed Within and Without Idaho. An employer is required to withhold only on the portion of the employee’s total compensation that is reasonably attributable to services performed in Idaho regardless of his post of duty. Compensation may be allocated to Idaho based on workdays, hours, mileage, or commissions.

02.Exceptions to Withholding Requirements. Withholding is not required if:(4-6-23)

a.The salaries, wages, tips, bonuses, and other compensation paid by an employer are for services performed wholly outside Idaho regardless of the residency or domicile of either the employer or employee.

b.The compensation is paid by the United States Armed Forces to a nonresident serving on active duty in Idaho;(4-6-23)

c.The compensation is paid to an interstate transportation employee of a rail carrier covered by Title 49, Section 11502, United States Code, who is a nonresident of Idaho; or(4-6-23)

d.The compensation is paid to an interstate transportation employee of a motor carrier covered by Title 49, Section 14503, United States Code, who is a nonresident of Idaho; or(4-6-23)

e.The compensation is paid to an employee of an interstate air carrier covered by Title 49, Section 40116, United States Code, who is a nonresident of Idaho and earns fifty percent (50%) or less of his compensation in Idaho; or(4-6-23)

f.The compensation is paid to a master or seaman on a vessel in the foreign, coastwise, intercoastal, interstate, or noncontiguous trade or to an individual employed on a fishing vessel or any fish processing vessel covered by Title 46, Section 11108, United States Code; or(4-6-23)

g.The compensation is exempt from federal withholding.(4-6-23)

IDAPA 35.01.01.872 Reporting and Paying State Income Tax Withholding (rule 872)

Payment of State Income Tax Withheld.(4-6-23)

a.In General. An employer must remit monthly any state income tax withheld. These monthly payments are due on or before the 20th day of the following month. However, employers who owe seven hundred fifty dollars ($750) or less per calendar quarter may, at the discretion of the Tax Commission, be allowed to remit the tax withheld on or before the last day of the month following the end of the quarter. Employers who owe less than seven hundred fifty dollars ($750) annually may be allowed to remit the tax withheld annually on or before January 31. When a filing cycle is changed, the change will take effect on January 1 of the following year.(4-6-23)

b.Semimonthly Filers.(4-6-23)

i.An employer who withholds state income taxes that meet or exceed the monthly or annual threshold amounts provided in Section 63-3035, Idaho Code, and listed in Subparagraph 872.01.b.ii., of this rule, will remit the tax withheld based on semimonthly withholding periods. The first semimonthly withholding period begins on the first day of the month and ends on the 15th day of the same month with payment made no later than the 20th day of the same month. The second period begins on the 16th day of the month and ends on the last day of the same month with payment made no later than the fifth day of the following month.(4-6-23)

ii.Threshold amounts:

iii.An employer who meets the threshold amounts provided in Section 63-3035, Idaho Code, and listed in Subparagraph 872.01.b.ii. of this rule, but only has one (1) monthly pay period, may request approval by the Tax Commission to pay and report monthly. The request should include verification of monthly payroll.(4-6-23)

c.Farmer-Employers. Generally an employer who is a farmer will remit state income tax withheld on or before the last day of January. However, an employer who is a farmer will remit the state income tax withheld on or before the last day of the month following the end of the quarter if he is a covered employer required to file with the Department of Commerce and Labor.(4-6-23)

02.Filing of Annual Reconciliation Returns.(4-6-23)

a.In General. An employer must file an annual reconciliation return for any calendar year in which the employer had an active Idaho withholding account or withheld Idaho income taxes. Such return will:(4-6-23)

i.Report payroll paid during the preceding calendar year; and(4-6-23)

ii.Reconcile the state income tax withheld during the preceding calendar year with the tax remitted for the preceding calendar year.(4-6-23)

b.Due Date of Reconciliation Returns. The annual reconciliation return must be filed with the Forms W-2 on or before such date as required for filing of the W-2. See Rule 874 of these rules. The Tax Commission may require a shorter filing period and due date.(4-6-23)

c.Zero Tax Returns. For reporting periods in which the employer had no payroll or withheld no tax, the annual reconciliation return must be completed and filed by the due date.(4-6-23)

03.Extension of Time to Pay or File Returns. The Tax Commission may allow a one (1) month extension of time to make a monthly or quarterly payment or to file the annual reconciliation return.(4-6-23)

a.The employer must file a written request by the due date of the payment or annual reconciliation return that identifies the reason for the extension and includes the required minimum payment. The minimum payment must be at least ninety percent (90%) of the tax withheld for the period or one hundred percent (100%) of the tax withheld for the same period of the prior year.(4-6-23)

b.The employer must file the annual reconciliation return within one (1) month of the due date. The tax paid with the extension request must be shown on the payment line of the return. Interest from the due date applies to any additional tax due.(4-6-23)

04.Valid Returns. All withholding returns and other documents required to be filed pursuant to Sections 63-3035 and 63-3036, Idaho Code, and this rule will be filed using the proper forms as prescribed by the Tax Commission. The forms will include the taxpayer’s name, signature, withholding account number, and federal employer identification number. Returns that fail to meet these requirements are invalid and may be returned to the taxpayer to be refiled. Failure to file a valid return by the due date may cause interest and penalties to be imposed.

IDAPA 35.01.01.873 Employee's Withholding Allowance Certificates (rule 873)

Section 63-3035, Idaho Code

01.Verification. The Tax Commission may request verification of the marital status or withholding Withholding Periods BeginningMonthly Threshold AmountsAnnual Threshold Amounts On or After July 1, 2005$20,000$240,000 On or After July 1, 2019$25,000$300,000 allowances claimed by an employee on federal Form W-4. If the employee fails to verify the claimed marital status or withholding allowances, a Notice of Deficiency as provided by Section 63-3045, Idaho Code, may be issued. If a Notice of Deficiency is issued but is not protested or is upheld on appeal, the Tax Commission will issue an order specifying the marital status and maximum number of withholding allowances the employee is allowed for Idaho withholding purposes.(4-6-23)

02.Notification. The Tax Commission is to notify the employer of the order. The order is effective immediately on receipt by the employer and is to remain in effect the rest of the calendar year, unless the employee files federal Form W-4 claiming fewer allowances than ordered. The employer is liable to the Tax Commission for any deficiencies that result from withholding in excess of the maximum number of withholding allowances specified in the most recent Tax Commission order.(4-6-23)

03.Petition for Changes. An employee subject to a Tax Commission order may petition the Tax Commission for a change to the order. If the employee establishes that a material change of circumstances has occurred, the Tax Commission will issue a new order and notify the employer. The determination of the Tax Commission on any change to the order is final.(4-6-23)

IDAPA 35.01.01.874 Employee’s Wage and Tax Statements (rule 874)

Form and Information Required. Federal Form W-2 (W-2) or a form of similar size and design may be used. In addition to the information required by the Internal Revenue Code, total Idaho wages paid, Idaho income tax withheld, Idaho withholding permit number, and the name of the state must be shown in the appropriate boxes. Incomplete, incorrect or altered forms are not acceptable and may be returned to the employer for correction.

02.Furnishing Forms W-2 to Employees. The employer must furnish each employee a W-2 before February 1, or at the request of the employee within thirty (30) days after termination of his employment.(4-6-23)

03.Filing Forms W-2 With the Tax Commission. On or before the last day of January, each employer must file with the Tax Commission a state copy of the W-2 for each employee to whom Idaho taxable wages were paid, regardless of whether Idaho income tax was withheld. If the employer had no employees and subsequently did not pay wages or withhold tax, no W-2s are required.(4-6-23)

04.Corrected Forms W-2. If a corrected W-2 is filed with the Internal Revenue Service, the W-2c must be filed with the Tax Commission.(4-6-23)

05.Employers Required to File Electronically. Each employer who is required to file W-2s electronically by Section 6011, Internal Revenue Code, must file through electronic filing with Idaho. In addition to the information required by the Internal Revenue Code, the electronic filing must also include the employer’s Idaho withholding account number, Idaho wages, and Idaho withholding. Employers who are required to file electronically but fail to do so are subject to the provisions of Section 63-3046(e)(1), Idaho Code, and treated as if no W-2s were filed.(7-1-24)

06.Services Performed Within and Without Idaho. If services are performed within and without Idaho, the state wages shown on the W-2 furnished to the employee must include the portion of the employee’s total wages reasonably attributed to services performed within Idaho as determined using the calculations in Rule 270 of these rules.(4-6-23)

07.Extension of Time to File Form W-2. The Tax Commission may allow a one (1) month extension of time to file the W-2s.(4-6-23)

a.The employer must file a written request by the due date of the W-2s that identifies the reason for the extension.(4-6-23)

b.The employer must file the W-2s within one (1) month of the due date. A penalty of two dollars ($2) per W-2 per month not filed may be applied if the W-2s are not submitted by the due date.(4-6-23)

IDAPA 35.01.01.875 (Reserved)

IDAPA 35.01.01.877 Backup Withholding by Pass-Through Entities (rule 877)

Sections 63-3022L and 63-3036B, Idaho Code In General. A pass-through entity that is transacting business in Idaho or an estate or trust that has income taxable in Idaho must withhold Idaho income tax from the owner’s or beneficiary’s share of income and guaranteed payments from the pass-through entity that is required to be included in the individual’s Idaho taxable income unless exempt from backup withholding by Section 63-3036B, Idaho Code, or this rule. For purposes of this rule, pass-through entity means “pass-through entity” as defined in Section 63-3006C, Idaho Code. The provisions of this rule do not affect the withholding requirements set forth in Sections 63-3035, 63-3035A, or 63-3036, Idaho Code, and related rules.(4-6-23)

02.Exceptions to Backup Withholding. Backup withholding by a pass-through entity is not required on the income of the following pass-through owners and beneficiaries:(4-6-23)

a.Owners and beneficiaries who are not natural persons, including corporations, partnerships, trusts, and estates.(4-6-23)

b.Unit holders of a publicly traded partnership as defined by Section 7404(b), Internal Revenue Code, if the publicly traded partnership:(4-6-23)

i.Is treated as a partnership for purposes of the Internal Revenue Code; and(4-6-23)

ii.Has agreed to file an annual information return. The information return must be in the form of a schedule included with the partnership’s Idaho Partnership Return of Income reporting the name, address, taxpayer identification number, and other information requested by the Tax Commission of each unit holder with a distributive share of partnership income in Idaho in excess of five hundred dollars ($500) for the taxable year.(4-6-23)

c.Resident individuals and part-year resident individuals who have income other than from a passthrough entity.(4-6-23)

d.Nonresident individuals if:(4-6-23)

i.The pass-through entity has reported and paid the tax relating to the individual on a composite return pursuant to Section 63-3022L, Idaho Code.(4-6-23)

ii.Such individual’s share of income and guaranteed payments of the pass-through entity from Idaho sources is less than one thousand dollars ($1,000) for the taxable year in which the income is subject to tax; (4-6-23)

iii.The income is subject to withholding under Section 63-3035 or 63-3036, Idaho Code; or (4-6-23)

iv.The individual has signed and the pass-through entity has approved an Idaho nonresident owner agreement.(4-6-23)

03.Idaho Nonresident Owner Agreement. When an individual signs an Idaho nonresident owner agreement, he agrees to file and pay tax on his share of Idaho income from a pass-through entity. The signed agreement must be the proper form prescribed by the Tax Commission and must be submitted to the pass-through entity each year. The pass-through entity must sign and approve the nonresident owner agreement for it to be valid.

Their approval will signify their acknowledgment that they are liable for any tax due at the corporate rate if the individual fails to file a return as agreed. If the pass-through entity does not approve the nonresident owner agreement, the pass-through entity must withhold or include the individual in the composite return. The pass-through entity must retain the forms for three years following the end of the taxable year for which it is to apply.(4-6-23)

04.Payment of Backup Withholding.(4-6-23)

a.The pass-through entity must withhold amounts from the pass-through income of nonresident individuals at the highest marginal rate applicable for the taxable year under Section 63-3024, Idaho Code. The amount withheld for a taxable year must be remitted to the Tax Commission annually on or before the fifteen day of the fourth month following the end of the taxable year, unless one of the exceptions under Subsection 877.02 of this rule apply to the owner or beneficiary. The amount withheld must be remitted on the appropriate return as required by the Tax Commission.(4-6-23)

b.Amounts remitted as backup withholding for a taxable year in accordance with the provisions of this rule will be considered to be in part payment of the tax imposed on such owner or beneficiary for his taxable year in which the pass-through entity’s taxable year ends.(4-6-23)

05.Backup Withholding Returns. A reconciliation schedule must be included with the pass-through entity’s Idaho income tax return. Returns submitted to the Tax Commission reporting amounts withheld as required by Section 63-3036B, Idaho Code, must include the following information:(4-6-23)

a.The amount of income described in Section 63-3022L(2), Idaho Code, by owner or beneficiary;

b.The amount of tax withheld;(4-6-23)

c.Name, address, filing option, and social security number of each owner or beneficiary;(4-6-23)

d.The pass-through entity’s name, and federal employer identification number.(4-6-23)

06.Failure to File Returns or Remit Backup Withholding. Returns that fail to meet the requirements of this rule are invalid and may be returned to the pass-through entity to be refiled. Failure to file a valid return or remit the proper amount of backup withholding by the due date may cause interest and penalties to be imposed.(4-6-23)

IDAPA 35.01.01.878 (Reserved)

IDAPA 35.01.01.880 Credits and Refunds (rule 880)

Section 63-3072, Idaho Code

01.Overpayment. The term overpayment includes:(4-6-23)

a.A voluntary and unrequested payment greater than an actual tax liability.(4-6-23)

b.An excessive amount that an employer withholds pursuant to Sections 63-3035 and 63-3036, Idaho

c.An excessive amount that a pass-through entity withholds pursuant to Section 63-3036B, Idaho

d.All amounts erroneously or illegally assessed or collected.(4-6-23)

e.The term overpayment does not include an amount paid pursuant to a final determination of tax, including a compromise and closing agreement, decision of the Tax Commission, decision of the Board of Tax Appeals, or final court judgment.(4-6-23)

02.Requirements of a Valid Refund Claim. Before the Tax Commission can credit or refund an overpayment, the taxpayer making the claim must establish both of the following:(4-6-23)

a.The basis for the credit or refund claim, and(4-6-23)

b.The amount of the overpayment.(4-6-23)

03.Timely Claim Required for Refund.(4-6-23)

a.The Tax Commission may not credit or refund an overpayment after the expiration of the period of limitations unless the taxpayer filed a claim before the expiration of the period.(4-6-23)

b.When an adjustment to the taxpayer’s federal return affects the calculation or application of an Idaho net operating loss, capital loss, or Idaho credit in a year otherwise closed by the period of limitations, the taxpayer has one (1) year from the date of the final determination to file a claim for refund.(4-6-23)

c.If a claim for credit or refund relates to an overpayment attributable to an Idaho net operating loss carryback incurred in taxable years beginning on and after January 1, 2013, an amended return carrying the loss back must be filed within one (1) year of the end of the taxable year of the net operating loss that results in such carryback.

04.Amended Returns Required as Refund Claims. The claim for a credit or refund must be made on an amended Idaho income tax return that is properly signed and includes an explanation of each legal or factual basis in sufficient detail to inform the Tax Commission of the reason for the claim. By signing the amended return the taxpayer is declaring that the claim for refund is true and correct to the best of his knowledge and belief and is made under the penalties of perjury.(4-6-23)

05.Closed Issues. The Tax Commission will deny a credit or refund claim for a taxable year for which the Tax Commission has issued a Notice of Deficiency, unless the taxpayer shows that the changes on the amended return are unrelated to the adjustments in the Notice of Deficiency or that the changes result from a final federal determination.(4-6-23)

06.Limitations on Refunds of Withholding and Estimated Payments. As provided by Section 63- 3072(c), Idaho Code, the Tax Commission may not refund taxes withheld from wages unless the taxpayer files a return within three (3) years after the due date. The Tax Commission may not refund any payment received with an extension of time to file or with a tentative return, including quarterly estimated payments, unless the taxpayer makes a claim for a refund within three (3) years of the due date of the return. However, when an individual is in a combat zone and entitled to an extension of time by Section 7508, Internal Revenue Code, the number of days disregarded under such section will be added to the three (3) year period for allowing refunds of amounts withheld or paid as estimated payments.(4-6-23)

07.Reduction or Denial of Refund Claims. If the Tax Commission determines that a refund claim is in error, the Tax Commission will deny the claim in whole or part. Unless the denial results from a mathematical error by the claimant, the Tax Commission will give notice of the denial by a Notice of Deficiency in the manner required by Section 63-3045, Idaho Code, and related rules. The protest and appeal process that applies to a Notice of Deficiency also applies to the denial or reduction of a refund. See Section 63-3045A, Idaho Code, for information on mathematical errors. 08.

Amended Federal Return. Filing a claim with the Internal Revenue Service to reduce taxable income does not extend the Idaho period of limitations for claiming a refund or credit of tax. If the statute of limitations is about to expire on a taxpayer’s Idaho return for which an issue is pending on his federal return or return filed with another state, the taxpayer should amend his Idaho return. He should clearly identify the amended return as a protective claim for refund. The taxpayer must notify the Tax Commission of the final resolution.(4-6-23)

09.Combined Reports -- Final Federal Determination and Change of Filing Method. If the Idaho period of limitations is open due to a final federal determination, a corporate taxpayer may not adjust its Idaho return to include a previously omitted corporation or to exclude any corporation previously included in a combined report.

10.Duplicate Returns. If a return is filed pursuant to Section 63-217(1)(b), Idaho Code, where the taxpayer establishes by competent evidence that the return was deposited in the United States mail or with a qualifying private delivery service (See IDAPA 35.02.01, “Tax Commission Administration and Enforcement Rules,”

Rule 010) on or before the date for filing and the Tax Commission has notified the taxpayer that it has not received the return, the taxpayer must submit a duplicate return within fifteen (15) days of such notification for the newly filed return to qualify as a duplicate return. The period of limitations for a duplicate return is the later of one (1) year from the filing of the duplicate return or the date provided for in Section 63-3072(b), Idaho Code.(4-6-23)

IDAPA 35.01.01.881 (Reserved)

IDAPA 35.01.01.885 Interest on Refunds (rule 885)

Sections 63-3073 and 63-3045, Idaho Code Computation. Except as provided in Subsection 885.02, the Tax Commission is to compute interest on a net refund as follows:(4-6-23)

a.Refunds of income tax withheld. The Tax Commission will pay interest on refunds of withholding if the refund is paid more than sixty (60) days after the due date of the income tax return or the date it was filed, whichever is later. For purposes of this rule, the refund is considered paid on the date it is postmarked. If a taxpayer unduly delays the processing of his refund by failing to respond promptly to requests for information or in any other way, the Tax Commission may deduct time attributable to the delay from the total processing time to determine whether interest is to be paid and from what date. Unless reasonable cause is established, undue delay occurs if the taxpayer’s delay is more than sixty (60) days. Pursuant to this subsection, interest is computed from the due date, or extended due date, of the return.(4-6-23)

b.Tentative payments. The Tax Commission may not pay interest on a refund resulting from an estimated or tentative payment.(4-6-23)

02.Refunds from Net Operating Loss and Capital Loss Carrybacks. Refunds from net operating loss and capital loss carrybacks include refunds from credits carried to years other than the year to which the net operating loss or capital loss deduction applies. Interest on these refunds is computed from the last day of the loss

IDAPA 35.01.01.886 (Reserved)

IDAPA 35.01.01.890 Notice of Adjustment of Federal Tax Liability (rule 890)

Section 63-3069, Idaho Code Written Notice.(4-6-23)

a.Written notice will include copies of all Revenue Agents’ reports, and any other documents and schedules required to clarify the adjustments to taxable income. If the final determination results in a refund of state taxes, an amended Idaho income tax return must accompany the written notice to be a valid claim for refund.

b.Written notice included with an income tax return for a year or years other than the year subject to the federal adjustment does not constitute the required notification.(4-6-23)

IDAPA 35.01.01.891 Notice of Adjustment of State or

TERRITORY TAX LIABILITY (RULE 891).

Sections 63-3069 and 63-3069A, Idaho Code Final Determination. The term final determination of any deficiency or refund of income tax due to another state or territory as used in Section 63-3069, Idaho Code, means the final resolution of all issues that were adjusted by the other state or territory.(4-6-23)

02.Written Notice.(4-6-23)

a.Written notice is to include copies of all reports issued by the other state or territory, and any other documents and schedules required to clarify the adjustments to taxable income of the state or territory. If the final determination results in a refund of Idaho taxes, an amended Idaho income tax return must accompany the written notice to be a valid claim for refund.(4-6-23)

b.Written notice included with an income tax return for a year or years other than the year subject to the adjustment by the state or territory does not constitute the required notification.(4-6-23)

IDAPA 35.01.01.892 (Reserved)

IDAPA 35.01.01.895 Period of Limitation on Assessment and Collection of Tax (rule 895)

Sections 63-3068 and 63-3069A, Idaho Code Federal Determination. The additional one (1) year period of limitation provided in Sections 63- 3068(f) and 63-3068(j), Idaho Code, does not begin to run if the final federal determination is delivered to the Tax Commission by someone other than the taxpayer or the taxpayer’s representative. The Internal Revenue Service and other taxing agencies are not representatives of taxpayers.(4-6-23)

02.State or Territory Determination. The additional one (1) year period of limitation provided in Section 63-3069A(2)(b), Idaho Code, does not begin to run if the final determination of income tax due to another state or territory is delivered to the Tax Commission by someone other than the taxpayer or the taxpayer's representative. Taxing agencies of other states or territories are not representatives of taxpayers.(4-6-23)

03.Protest of a Notice of Deficiency. If a taxpayer protests a Notice of Deficiency, the expiration of the period of limitations provided in Section 63-3068, Idaho Code, is suspended.(4-6-23)

04.Waiver of the Period of Limitation. If a taxpayer executes a waiver to extend the period of limitation, the waiver will state the taxpayer’s name as shown on the tax return. If a group return is filed, the waiver applies to each corporation included in the combined group.(4-6-23)

05.Duplicate Returns. If a return is filed pursuant to Section 63-217(1)(b), Idaho Code, where the taxpayer establishes by competent evidence that the return was deposited in the United States mail or with a qualifying private delivery service (See IDAPA 35.02.01, “Tax Commission Administration and Enforcement Rules,”

Rule 010) on or before the date for filing and the Tax Commission has notified the taxpayer that it has not received the return, the taxpayer is to submit a duplicate return within fifteen (15) days of such notification for the newly filed return to qualify as a duplicate return. The period of limitations for a duplicate return is the later of one (1) year from the filing of the duplicate return or the date provided for in Section 63-3068, Idaho Code.(4-6-23)

IDAPA 35.01.01.896 Request for Prompt Action by

THE TAX COMMISSION (RULE 896).

Section 63-3068(e), Idaho Code Requirements of a Valid Request for Prompt Action. The personal representative, executor, administrator, or other fiduciary representing the estate of a decedent is to file the request for prompt action in writing with the Tax Commission. The request must meet the following qualifications:(4-6-23)

a.It must be filed after the applicable return has been filed;(4-6-23)

b.It must be filed separately from any other document;(4-6-23)

c.It must identify the taxpayer by name and identification number and the taxable periods for which the prompt action is requested; and(4-6-23)

d.It must clearly state that it is a request for prompt action pursuant to Section 63-3068(e), Idaho

02.Applicable Returns. A request for prompt action does not apply to any return filed after the request has been filed. The request applies only to returns reflecting income earned or other activities and transactions occurring during the lifetime of the decedent or by his estate during the period of administration.(4-6-23)

IDAPA 35.01.01.897 (Reserved)

IDAPA 35.01.01.900 Responsibility for Payment of Corporate Taxes and Penalties (rule 900)

Section 63-3078, Idaho Code. The Tax Commission or its delegate may issue a jeopardy assessment or take any other action necessary to assess and collect the amounts due from liable individuals. The action may include the filing of a lien on the property of the individual found liable, or seizure and sale of his property or any other means of collection.

The liable individuals are to have the remedies provided in Sections 63-3045, 63-3049, 63-3065, and 63-3074, Idaho

IDAPA 35.01.01.901 (Reserved)

IDAPA 35.01.01.940 Idaho Small Employer Incentive Act of 2005 as Modified by 2006

LEGISLATION – DEFINITIONS (RULE 940).

Title 63, Chapter 44, Idaho Code. For purposes of administe ring the Idaho Small Employer Incentive Act of 2005, as modified by 2006 legislation, and Rules 940 through 944 of these rules, the following definitions apply:(4-6-23)

01.Buildings and Structural Components. Buildings and structural components means buildings and structural components of buildings as defined in Federal Treasury Regulation Section 1.48-1 for Internal Revenue Code Section 48 repealed by Public Law 101-508.(4-6-23)

02.New Plant and Building Facilities. New plant and building facilities are facilities where employees are physically employed.(4-6-23)

03.Investment in New Plant. Investment in new plant means new plant and building facilities:

a.That are constructed or erected by the taxpayer, or(4-6-23)

b.That are acquired by the taxpayer and whose original use begins with the taxpayer after such acquisition. Original use means the first use to which the property is put, whether or not such use corresponds to the use of such property by the taxpayer. Property used by the taxpayer prior to its acquisition does not qualify as new plant.(4-6-23)

c.That qualify for the investment tax credit under Section 63-3029B, Idaho Code, or is a building or structural components of buildings.(4-6-23)

04.Making Capital Investments. The date capital investments are considered made will be determined in the same manner as the date assets are considered placed in service pursuant to the federal treasury regulations.(4-6-23)

05.New Employee. A new employee cannot be created by reorganizing the business in such a manner that the employee is reassigned to working in the project site instead of outside the project site. An employee within Idaho transferred to a qualifying position within the project site may qualify as a new employee if his previous position is filled by another employee creating a net new job in Idaho. An employee working outside of Idaho and transferred to a qualifying position within the project site may also qualify as a new employee.(4-6-23)

06.Project Period. The project period is a period of time that begins and ends as follows:(4-6-23)

a.The project period may begin on one (1) of the following dates, but not prior to January 1, 2006:

i.The date of a physical change to the project site; or(4-6-23)

ii.The date new employees begin providing personal services at the project site.(4-6-23)

b.The project period ends at the earliest of:(4-6-23)

i.The conclusion of the project,(4-6-23)

ii.Ten (10) years after the beginning of the project; or(4-6-23)

iii.December 31, 2030.(4-6-23)

07.Project Site. The project site may include one (1) location or more than one (1) location in Idaho.

However, if more than one (1) location in Idaho is used, eighty percent (80%) or more of the investment required in the tax incentive criteria is to be located at one (1) contiguous site.(4-6-23)

08.Small Employer Investment Tax Credit. Small employer investment tax credit means the additional income tax credit allowed by Section 63-4403, Idaho Code.(4-6-23)

09.Small Employer New Jobs Tax Credit. Small employer new jobs tax credit means the additional income tax credit for new jobs allowed by Section 63-4405, Idaho Code.(4-6-23)

10.Small Employer Real Property Improvement Tax Credit. Small employer real property improvement tax credit means the real property improvement tax credit allowed by Section 63-4404, Idaho Code.

11.Small Employer Tax Incentive Criteria. Small employer tax incentive criteria means the tax incentive criteria defined in Section 63-4402(2)(j), Idaho Code. See Rule 942 of these rules for more information.

12.Small Employer Tax Incentives. Small employer tax incentives means the tax incentives allowed by Title 63, Chapter 44, Idaho Code.(4-6-23)

IDAPA 35.01.01.941 Idaho Small Employer Incentive Act of 2005 as Modified by 2006

LEGISLATION: IN GENERAL (RULE 941).

Sections 63-4401 and 63-4406, Idaho Code Pass-Through Entities. The income tax credits may be earned by a partnership, S corporation, estate, or trust and passed through to the partner, shareholder, or beneficiary. See Rule 785 of these rules for the method of attributing the credits, for pass-through entities paying tax, and the application of limitations on passthrough credits.(4-6-23)

02.Reorganizations, Mergers and Liquidations. The small employer investment tax credit and real property improvement tax credits are subject to recapture in accordance with Section 47, Internal Revenue Code, as in effect prior to the enactment of Public Law 101-508. Exceptions included in Section 47(b), Internal Revenue Code, to the general recapture rules, including a mere change in the form of conducting the trade or business and transactions to which Section 381(a), Internal Revenue Code, applies will not cause recapture to occur so long as the property is retained in such trade or business as qualified investment in new plant and the taxpayer retains a substantial interest in such trade or business. To the extent that provisions of the Internal Revenue Code allow an acquiring taxpayer to succeed to and take into account unused investment credits of the distributor or transferor taxpayer, such provisions apply to the acquiring taxpayer with regard to any unused Idaho small employer investment tax credits and real property improvement tax credits. See Rule 946 of these rules for information related to the recapture required by an acquiring taxpayer.(4-6-23)

03.Relocations. The relocation from one (1) project site to a new project site within the state may not create new eligibility for the current or any succeeding business entity.(4-6-23)

04.Unitary Taxpayers. A corporation included as a member of a unitary group may elect to share the small employer investment tax credit, real property improvement tax credit, and new jobs tax credit it earns with other members of the unitary group. Before the corporation may share the credit, it must claim the credit to the extent allowable against its tax liability. The credit available to be shared is the amount of each credit carryover and credit earned for the taxable year that exceeds the limitations provided for each credit. The limitation is applied against the tax computed for the corporation that claims the credit. Credit shared with another member of the unitary group reduces the carryforward.(4-6-23)

IDAPA 35.01.01.942 Idaho Small Employer Incentive Act of 2005 as Modified by 2006

LEGISLATION: SMALL EMPLOYER TAX INCENTIVE CRITERIA (RULE 942).

Section 63-4402, Idaho Code In General. The small employer tax incentive criteria are the minimum requirements a taxpayer must meet in order to be eligible for small employer tax incentives. To meet the small employer tax incentive criteria, a taxpayer must satisfy the following requirements at the project site, during the project period:(4-6-23)

a.Making capital investment in new plant and building facilities totaling five hundred thousand dollars ($500,000) or more;(4-6-23)

b.Increasing employment by at least ten (10) new employees who meet the requirements of Section 63-4402(2)(j)(ii)(1), Idaho Code;(4-6-23)

c.Employment increases more than the ten (10) new employees described in Paragraph 942.01.b. of this rule will meet the requirements of Section 63-4402(2)(j)(ii)(2), Idaho Code; and(4-6-23)

d.Once the increase in employment has been reached, maintaining that increased employment in Idaho for the remainder of the project period.(4-6-23)

02.Certification. A taxpayer is to certify that he has met, or will meet, the small employer tax incentive criteria before he can claim any of the small employer tax incentives. Certification is accomplished by filing the applicable form as prescribed by the Tax Commission. The certification form includes the following information and be filed with the Tax Commission prior to claiming any of the small employer tax incentives:(4-6-23)

a.A description of the qualifying project;(4-6-23)

b.The estimated or actual start date of the project;(4-6-23)

c.The estimated or actual end date of the project;(4-6-23)

d.The location of the project site or sites;(4-6-23)

e.The estimated or actual number of new jobs created during the project period; and(4-6-23)

f.The estimated or actual cost of capital investment in new plant and building facilities for each year in the project period.(4-6-23)

03.Copy of Certification Form Required. A copy of the certification form will be attached to the Idaho income tax return for each taxable year that a small employer income tax incentive is claimed or carried over.

IDAPA 35.01.01.943 (Reserved)

IDAPA 35.01.01.944 Idaho Small Employer Incentive Act of 2005 as Modified by 2006

LEGISLATION – SMALL EMPLOYER REAL PROPERTY IMPROVEMENT TAX CREDIT (RULE 944).

Sections 63-4404 and 63-4406, Idaho Code Buildings and Structural Components of Buildings.(4-6-23)

a.To qualify for the small employer real property improvement tax credit, buildings and structural components of buildings must meet the following requirements:(4-6-23)

i.The buildings and structural components of buildings must be new as defined in Subsection 940.03 of these rules. Structural components placed in service as part of a renovation of an existing building do not qualify.

ii.The buildings and structural components of buildings must be placed in service at the project site.

b.Buildings and structural components of buildings that meet the definition of qualified investments pursuant to Section 63-3029B, Idaho Code, will not qualify for the small employer real property improvement tax credit.(4-6-23)

IDAPA 35.01.01.945 (Reserved)

35.01.10 Idaho Cigarette and Tobacco Products Taxes Administrative Rules

IDAPA 35.01.10.000 Legal Authority

Sections 63-105, 63-2501, 63-2553, Idaho Code.(7-1-25)

IDAPA 35.01.10.001 Scope

These rules are construed to reach the full j urisdictional extent of the state of Idaho’s authority to impose a tax on all cigarette and tobacco products sold, used, consumed, handled or distributed within this state.(7-1-25)

IDAPA 35.01.10.002 (Reserved)

IDAPA 35.01.10.010 Definitions

Sections 63-2502, 63-2528, 63-2551, 63-3611, Idaho Code Interstate Commerce Sale. A sale or other transfer of ownership between a person located in Idaho and a person located outside Idaho or within the boundaries of an Idaho reservation.(7-1-25)

02.Reservation. Reservation means:(7-1-25)

a.Federally recognized land reserved for American Indian tribes by treaty with the United States, a state, or a territorial government and established by acts of Congress or the Executive branch of the United States;

b.Land held in trust by the United States for the use and benefit of an Idaho tribe; or(7-1-25)

c.Land reserved for the United States military.(7-1-25)

03.Unmarketable Cigarettes and Tobacco Products. Any package of cigarettes with an Idaho stamp or tobacco product becomes unmarketable when:(7-1-25)

a.It is returned to the manufacturer as stale or otherwise unsellable, or(7-1-25)

b.The manufacturer or brand family of such cigarettes or roll-your-own tobacco is removed from the Idaho Attorney General’s directory.(7-1-25)

IDAPA 35.01.10.011 Cigarette and Tobacco Products Subject to Tax

Sections 63-2506, 63-2510, 63-2510A, 63-2552, 63-2552A, 63-2552B, Idaho Code Cigarette Tax. Cigarette tax is due when a cigarette stamp is affixed to a package of cigarettes.

a.Only an Idaho tribe, an enrolled Idaho tribal member, or a business wholly owned and operated by the tribe or tribal member, can purchase unstamped packages of cigarettes for delivery to the reservation.(7-1-25)

b.Non-tribal retailers located within a tribal reservation are forbidden from selling cigarettes without an Idaho cigarette stamp affixed.(7-1-25)

IDAPA 35.01.10.012 Tax Permits

Sections 63-2503, 63-2504, 63-2526, 63-2554, Idaho Code Cigarette Tax Permit. A wholesaler does not need a cigarette tax permit when buying only stamped cigarettes. It is mandatory to have a cigarette tax permit when:(7-1-25)

a.The wholesaler affixes Idaho stamps to packages of cigarettes.(7-1-25)

b.The wholesaler is located in Idaho and makes interstate commerce sales of cigarettes.(7-1-25)

c.The wholesaler makes sales delivered to a reservation and the purchaser is the U.S. military, an Idaho tribe, an enrolled Idaho tribal member, or a business wholly owned and operated by the tribe or tribal member.

02.Permits Non-Transferable. When a business is sold or transferred the permits are not transferable.

a.It is mandatory for the new owner or lessee to obtain their own permits.(7-1-25)

b.If the previous owner does not cancel their permits, they may be responsible for all tax, penalty, and interest resulting from the use of their permit by the new owner or lessee.(7-1-25)

c.Cancellation of a permit is accomplished by written notice to the Tax Commission.(7-1-25)

IDAPA 35.01.10.013 (Reserved)

IDAPA 35.01.10.015 Stamp Inventory

Sections 63-2510, 63-2510A, Idaho Code

01.Obtaining Stamps. Cigarette stamps may only be obtained from the Boise office of the Tax Commission. Failure to file a cigarette tax return or pay the tax on a timely basis will result in no additional stamps being issued by the Tax Commission to a wholesaler until clear and convincing evidence is received by the Tax Commission that the return has been filed and the tax has been paid.(7-1-25)

02.Unused Stamp Inventory. A wholesaler may not hold an inventory of unused Idaho cigarette stamps exceeding the face value of their bond. If no bond is required a, wholesaler’s inventory of unused Idaho cigarette stamps cannot exceed two (2) times the wholesaler’s average monthly tax liability.(7-1-25)

03.Repayment of Allowance. The Tax Commission will reduce all credit or refund claims for stamps affixed to packages of cigarettes by the discount for affixing stamps.(7-1-25)

04.Physical Security. A wholesaler is responsible for the face value of all stamps received from the Tax Commission and for providing physical security for the stamps in the wholesaler’s possession.(7-1-25)

05.Unusable Stamps. Stamps that are unused, unfit, or damaged may be returned to the Tax Commission. If stamps cannot be returned to the Tax Commission, the wholesaler will submit a request for stamp destruction on a Tax Commission prescribed form. Destruction of stamps cannot take place without approval from the Tax Commission. The wholesaler may make the adjustment on the next monthly tax return, provided the approval documentation is attached to the return.(7-1-25)

IDAPA 35.01.10.016 Wholesaler's Credit or Refund Claims

Sections 63-2510, 63-2559, Idaho Code Stamped Cigarette Tax Credits or Refunds. Stamps affixed to cigarettes destroyed by the manufacturer or wholesaler as a result of cigarettes being unmarked may be redeemed by the wholesaler for credit against future tax due if:(7-1-25)

a.The wholesaler provides an affidavit or returned goods receipt from the manufacturer detailing the number of packages, package type, and date the stamped cigarettes were returned. The returned goods receipt will include a bill of lading.(7-1-25)

b.The wholesaler submits a request for stamped cigarette destruction to the Tax Commission in writing at least ten (10) working days prior to the scheduled destruction. The notice has to include a complete description of the number of packages, package type, date and time, and manner the stamped cigarettes will be destroyed. All requests have to be approved by the Tax Commission prior to destruction.(7-1-25)

02.Tobacco Products Tax Credits and Refunds. Credit or refund claims can be made for unmarketable tobacco products using the following methods:(7-1-25)

a.Records are provided documenting the return of tobacco products to the manufacturer.(7-1-25)

b.The distributor destroys tobacco products after submitting a destruction request form to the Tax Commission. Tobacco products can be destroyed in a manner authorized by the Tax Commission after receiving approval.(7-1-25)

IDAPA 35.01.10.017 (Reserved)

IDAPA 35.01.10.021 Mandatory Records

Sections 63-2511, 63-2555, Idaho Code

01.In General. Every person liable for payment of taxes on cigarettes or tobacco products needs to keep and preserve the following records in date order:(7-1-25)

a.A daily record of all cash and credit sales including invoices, receipts, journals, and other related records.(7-1-25)

b.A record of the amount of all merchandise purchased, including all bills of lading, invoice, sales receipts, bank statements, canceled checks, and copies of purchase orders.(7-1-25)

c.Supporting documents for all deductions and exemptions allowed by law or claimed on a tax return.

d.True and complete physical counts of the cigarette and tobacco products inventory taken at the end of each reporting period.(7-1-25)

e.True and complete records of breakage and spoilage claimed as a deduction from inventory.

f.Other documents used in preparing or supporting the accuracy of the return.(7-1-25)

02.Records Retention. If a taxpayer appeals an assessment, all records need to be kept until final disposition of the appeal.(7-1-25)

IDAPA 35.01.10.022 (Reserved)

35.01.03 Property Tax Administrative Rules

IDAPA 35.01.03.000 Legal Authority

In accordance with Section 63-105 and 63-105A, Idaho Code, the Tax Commission has promulgated rules implementing the provisions of the Idaho Statutes relating to the property tax laws and related statutes, Chapters 1 through 17 and Chapters 28, 30, 35, 36, and 45, Title 63, Idaho Code. Rules relating to the market value of recreational vehicles are authorized by Section 49-446, Idaho Code.(7-1-24)

IDAPA 35.01.03.001 (Reserved)

IDAPA 35.01.03.003 Incorporation by Reference

01.Documents Incorporated by Reference.

The following documents are incorporated by reference into these rules:(7-1-24) a.“Standard on Ratio Studies” published in 2013, “Standard on Digital Cadastral Maps and Parcel Identifiers” published in 2015, “Standard on Mass Appraisal of Real Property” published in 2017, “Standard on Verification and Adjustment of Sales” published in 2020, all published by the International Association of Assessing Officers. These documents can be electronically accessed at http://www.iaao.org/wcm/Resources/ Publications_access/Technical_Standards/wcm/Resources_Content/Pubs/Technical_Standards.aspx?hkey=9c330567 -135b-4adc-a772-00008232ab90 which was last accessed and verified on April 10, 2023.(7-1-24) b.“Forest Habitat Types of Northern Idaho: A Second Approximation” published by the Government Printing Office for the U. S. Forest Service in 1991, General Technical Report INT-236, written by Cooper, Stephen V., Neiman, Kenneth E., Rev, David W., and Roberts, Kenneth E.(7-1-24) c.“Forest Habitat Types of Central Idaho” published by the Government Printing Office for the Intermountain Forest and Range Experimentation Station of the U. S. Forest Service in 1981, General Technical Report INT-114, written by Kittams, Jay A., Pfister, Robert D., Ryker, Russell A., and Steele, Robert.(7-1-24) d.“Yield of Even-Aged Stands of Ponderosa Pine” published by the Government Printing Office for the U. S. Department of Agriculture in 1938, Technical Bulletin No. 630.(7-1-24) e.“Second-Growth Yield, Stand, and Volume Table for the Western White Pine Type” published by the Government Printing Office for the U. S. Department of Agriculture in 1932, Technical Bulletin No. 323. f.“Manual of Surveying Instructions” published by the Federal Bureau of Land Management and the Public Land Survey System Foundation in 2009.(7-1-24)

IDAPA 35.01.03.004 (Reserved)

IDAPA 35.01.03.020 Value of Recreational Vehicles for Annual Registration and Taxation of

UNREGISTERED RECREATIONAL VEHICLES.

Section 49-446, Idaho Code Value of Recreational Vehicle For Registration Fees. The County assessors will administer and collect the recreational vehicle (RV) registration fee based on the market value calculated from the following depreciation schedule. For all other types of recreational vehicles, the assessor will use any available standard industry indices of retail value to determine the market value. If no such indices are available, the assessor will determine market value from sale price or by using appraisal procedures as defined in Rule 217 of these rules. See Depreciation Schedule for RVs at https://tax.idaho.gov.(7-1-24)

02.Value of Motor Home or Van Conversion For Registration Fees. The value of any motor home or van conversion used to calculate the registration fee will exclude any chassis value. See Motor Home/Van Type Valuation Factor at https://tax.idaho.gov.(7-1-24)

03.Value of Vehicles Designed For Combined RV and Non-RV Uses For Registration Fees. For vehicles designed to have part of the vehicle for RV use and other parts of the vehicle for non-RV uses like transporting horses or other cargo, the value of the RV to be used to calculate the registration fee on or after January 1, 2015, is fifty percent (50%) of the sales price.(7-1-24)

04.Assessment Notice Mailed or Assessment Canceled. If the required annual registration fee is not paid by August 31, the assessor will mail an assessment notice to the owner of the recreational vehicle. If the registration fee is paid before the fourth Monday of November, the assessor will cancel the assessment.(7-1-24)

IDAPA 35.01.03.021 (Reserved)

IDAPA 35.01.03.114 Powers and Duties - Property Tax - Value Information

Sections 63-105A and 63-509, Idaho Code Each county assessor will report to the Tax Commission in the same manner and at the same time as the abstract under Section 63-509, Idaho Code, the number of properties, the aggregate total market value, and the exempted value of the properties granted the homestead exemption under Section 63-602G, Idaho Code, for the current year’s property roll. The report will group properties in twenty-five thousand dollars ($25,000) increments and end with the group of properties exceeding the value of more than two million dollars ($2,000,000).(7-1-24)

IDAPA 35.01.03.115 Powers and Duties - Property Tax - Value Information

Sections 63-105A and 63-509, Idaho Code Requirement to Submit Abstracts. Abstracts are submitted for the county, the cities, or the portion of each city located in the county, the Boise School District, and any taxing district or unit of government with a restriction providing that such district does not levy property taxes on all otherwise taxable property as described in Rule 808 of these rules.(7-1-24)

02.Values by Secondary Category. For each of the abstracts required in Subsection 115.01 of this rule, each assessor will report to the county auditor the market value and exempted value of all property by secondary categories, described in Rules 510, 511, and 512 of these rules.(7-1-24)

03.Cross Reference. See Rules 509, 510, 511, 512, and 809 of these rules.(7-1-24)

IDAPA 35.01.03.116 (Reserved)

IDAPA 35.01.03.120 Investigation of Written Complaints

a.Complaint means a signed, written statement submitted to the Tax Commission requesting that this agency investigate any actions by county officials relating to property tax assessment or administration, provided such actions are not related to personnel matter or matters relating to the expenditure of funds.(7-1-24)

b.Complainant means any individual making a complaint.(7-1-24)

c.Investigation means observation and close examination of a county official’s application of property tax assessment or administration law and Tax Commission rules. The investigation may require field inspections of property, analysis of public records or the interviewing of witnesses. Investigations are limited to specific issues identified in the complaint.(7-1-24)

d.County official means the elected or appointed official whose actions are the subject of the complaint.(7-1-24)

02.Investigation Procedure. The following procedures apply to an investigation of a complaint.

a.The Tax Commission will examine the complaint and decide if a formal investigation is necessary.

b.Within thirty (30) days of receipt of a complaint, the Tax Commission will notify the complainant of the decision regarding initiation of an investigation. If an investigation is initiated, the affected county official(s) will also be notified within this time frame.(7-1-24)

c.The investigator and legal counsel will prepare a preliminary report containing findings, recommendations, and may include information from the official(s).(7-1-24)

d.The complainant and the official(s) will receive a copy of the preliminary report. The Tax Commission investigators will attend any meetings held to discuss the preliminary report with the affected county official(s) and the complainant.(7-1-24)

e.The complainant and the county official(s) are afforded a specified period for review, comment, and to correct any errors of fact.(7-1-24)

f. The investigator and legal counsel will prepare a final report following the review by the complainant and public official(s), highlighting any changes from the preliminary report.(7-1-24)

3. County Officials’ Response to Final Report. After the final report is completed, the county official(s) will outline how they will implement the investigator’s recommendations and provide a written explanation of why any recommendation has been rejected.(7-1-24)

4. Conclusion of Investigation. The investigator’s final report and the county officials’ written response to the report will conclude the investigation.(7-1-24)

5. Special Rules for Investigation of Complaints About Property Tax Budgets or Levies. When complaints are made about property tax budgets or levies of taxing districts, the results of any investigation will also be reported to the appropriate taxing district, the county prosecuting attorney, and affected county officials. The Tax Commission's investigatory authority is limited to determining whether a levy rate or property tax budget increase exceeds any statutory maximum, or whether a levy is unauthorized. Any such investigation must be conducted in accordance with the time constraints found in Section 63-809, Idaho Code.(7-1-24)

IDAPA 35.01.03.121 (Reserved)

IDAPA 35.01.03.125 Program of Education

Section 63-105A(17), Idaho Code Administration. The program of education is administered by the Tax Commission’s education director.(7-1-24)

02.Appraisal School and Other Courses. An appraisal school will be held at least once each year.

The school will offer courses for training the Tax Commission’s employees, county commissioners, and assessment personnel. The education director will develop the curriculum for the annual appraisal school. Other courses may be developed and offered as approved by the education director.(7-1-24)

03.Record Keeping and Reporting of Attendance, Grades, and Credit Hours. The education director will maintain student attendance records, records of education hours earned, status of certification, and grades.(7-1-24)

a.The education director and course instructors will monitor attendance and hours of education to be awarded to each student attending the Tax Commission administered classes. A certificate of completion showing the number of education hours to be awarded will be issued by the education director for the Tax Commission administered classes. The examination committee must approve any classes not administered by the Tax Commission prior to the awarding of education hours. In order to receive credit for classes not administered by the Tax Commission, the student will provide a certificate of completion showing the number of education hours completed, a course description, and the dates attended.(7-1-24)

b.The education director will maintain records to show the number of education hours completed during the current year and the previous two (2) years. By June and November of each year, the education director will send a certification status report to each county assessor or applicable supervisor. This report will list each certified property tax appraiser who is known to be employed by or under contract with said assessor and show the number of hours of education completed during the previous year and current calendar year.(7-1-24)

c.If a test is given for Tax Commission developed courses, the education director will notify the appropriate county assessor or applicable supervisor of the grade achieved on the test.(7-1-24)

04.Examination Committee -- Establishment and Procedures. The examination committee is composed of three (3) assessors, one (1) member of the Idaho Association of Assessment Personnel, and the education director. The education director will appoint the members of the committee. The committee will operate by majority rule.(7-1-24)

a.The education director will chair the committee.(7-1-24)

b.An applicant may appeal any rulings, matters involving examination structure, grading, or grievances with the committee to a review board. No board member may be an assessor of the applicant’s county or a member of the examination committee. The review board will consist of the following four (4) persons:(7-1-24)

i.The president of the Idaho Association of County Assessors;(7-1-24)

ii.A person appointed by the president of the Idaho Association of County Assessors;(7-1-24)

iii.A person appointed by the examination committee; and(7-1-24)

iv.A person appointed by the education director.(7-1-24)

c.The committee will decide which courses meet the requirements for obtaining and maintaining certification and the hours of appraisal education awarded for each course.(7-1-24)

05.Cross Reference. See Rules 126 and Rule 128 of these rules for certification programs.(7-1-24)

IDAPA 35.01.03.126 Property Tax Appraiser Certification Program

Application for Certification.(7-1-24)

a.After the applicant has completed the requirements of Subsection 126.02 of this rule, the applicant will submit the completed application form to the education director. The application will list the following: (7-1-24)

i.The name and address of the applicant;(7-1-24)

ii.The applicant’s employer; and(7-1-24)

iii.The courses completed.(7-1-24)

b.The application must be signed and dated by the applicant and by the county assessor certifying the completion of the minimum experience requirement.(7-1-24)

02.Certification Requirements. An applicant for certification must pass at least two (2) appraisal courses: the Tax Commission’s Principles of Property Valuation or the International Association of Assessing Officers’ (IAAO) Course 101; and IAAO Course No. 102 or IAAO Course 201 or IAAO Course 300, or equivalent courses approved by the examination committee, and must have a minimum of twelve (12) months experience appraising for tax assessment purposes in Idaho or equivalent property tax appraisal experience approved by the examination committee. These requirements must be completed in the five (5) year period immediately preceding application except when the applicant proves equivalent education and experience.(7-1-24)

a.Upon approval of the examination committee, an applicant may take one (1) required course and challenge the second required course by passing a test. The education director will set the time and place for the test.

b.With the exceptions of the county assessor, the members of the county board of equalization, and the Tax Commissioners, all persons making decisions regarding final values for assessment purposes are certified property tax appraisers.(7-1-24)

03.Maintaining Property Tax Appraisal Certification.(7-1-24)

a.To maintain certification each appraiser must complete thirty-two (32) hours of continuing education within two (2) years of the certification date. Thereafter, by January 1 of each year, each appraiser will have completed thirty-two (32) hours of continuing education during the previous two (2) years.(7-1-24)

b.When any certified property tax appraiser fails to meet the continuing education requirements, the examination committee will place this person on six (6) month probation. When any certified property tax appraiser fails to meet the continuing education requirements within this probationary period, the person will forfeit certification or may, on a one (1) time only basis, submit a written petition to the examination committee for a six (6) month extension of probation. This person must submit this petition at least thirty (30) days prior to the expiration date of the first probationary period.(7-1-24)

c.For recertification, an applicant must apply to the examination committee within five (5) years of the date certification was canceled. An applicant for recertification must satisfactorily complete a written examination approved by the examination committee. The examination committee will decide the time and place of the examination. If more than five (5) years have lapsed since certification was canceled, the examination committee will not grant recertification. After the five (5) year period, an applicant must apply for certification under the same conditions as required for initial certification and a new certification number will be issued.(7-1-24)

04.Cross Reference. See Section 63-201. (1)(a), Idaho Code, and Rule 125 of these rules.(7-1-24)

IDAPA 35.01.03.127 (Reserved)

IDAPA 35.01.03.128 Cadastral Certification Program

Application for Certification.(7-1-24)

a.After the applicant has completed the requirements provided in Subsection 128.02 of this rule, the applicant will submit the completed application form to the education director. The application will list the following:

i.The name and address of the applicant;(7-1-24)

ii.The applicant’s employer; and(7-1-24)

iii.The courses completed.(7-1-24)

b.The application must be signed and dated by the applicant and by the count assessor certifying the completion of the minimum experience requirement.(7-1-24)

02.Certification Requirements. An applicant for certification must have passed the Tax Commission’s Basic Mapping Course and the International Association of Assessing Officers’ (IAAO) Course 600 or IAAO Course 601, or equivalent courses, and must have a minimum of twelve (12) months experience working as a cadastral specialist in Idaho or equivalent cadastral experience approved by the examination committee. These requirements must be completed in the five (5) year period immediately preceding application except when the applicant proves equivalent education and experience.(7-1-24)

a.Upon approval of the examination committee, an applicant may take one (1) required course and challenge the second required course by passing a test. The education director will set the time and place for the test.

03.Maintaining Cadastral Specialist Certification.(7-1-24)

a.To maintain certification, each cadastral specialist must complete thirty-two (32) hours of continuing education within two (2) years of the certification date. Thereafter, by January 1 of each year, each cadastral specialist will have completed thirty-two (32) hours of continuing education during the previous two (2) years.(7-1-24)

b.When any certified cadastral specialist fails to meet the continuing education requirements, the education committee will place this person on six (6) month probation. When any certified cadastral specialist fails to meet the continuing education requirements within this probationary period, the person will forfeit certification or may, on a one (1) time only basis, submit a written petition to the examination committee for a six (6) month extension of probation. This person must submit this petition at least thirty (30) days prior to the expiration date of the first probationary period.(7-1-24)

c.For recertification, an applicant must apply to the examination committee within five (5) years of the date certification was canceled. An applicant for recertification must satisfactorily complete a written examination approved by the examination committee. The examination committee will decide the time and place of the examination. If more than five (5) years have lapsed since certification was canceled, the examination committee will not grant recertification. After the five (5) year period, an applicant must apply for certification under the same conditions as required for initial certification and a new certification number will be issued.(7-1-24)

04.Cross Reference. See Section 63-201 (1)(a), Idaho Code, and Rule 125 of these rules.(7-1-24)

IDAPA 35.01.03.129 (Reserved)

IDAPA 35.01.03.130 Description of Primary Categories Used to Test for Equalization

Sections 63-109 and 63-315, Idaho Code Prim ary categories listed herein are for the purpose of testing values in each county and the Boise School District for equalization by the Tax Commission under Section 63-109, Idaho Code.(7-1-24)

01.Definitions. The following definitions apply for the purposes of testing for equalization under Section 63-109, Idaho Code, and reporting under Section 63-509, Idaho Code.(7-1-24)

a.Primary categories are used to study the following combinations of secondary categories: (7-1-24)

i.Vacant Residential Land: secondary categories 12, 15, 18 and 20;(7-1-24)

ii.Improved Residential Property: secondary categories 10, 12, 15, 18, 20, 26, 31, 34, 37, 40, 41, 46, 47, 48, and 50;(7-1-24)

iii.Vacant Commercial or Industrial Land: secondary categories 11, 13, 14, 16, 17, 21, and 22;

iv.Improved Commercial or Industrial Property: secondary categories 11, 13, 14, 16, 17, 21, 22, 27, 33, 35, 36, 38, 39, 42, 43, and 51;(7-1-24)

v.Manufactured Housing: secondary categories 47 and 65; and(7-1-24)

vi.Agricultural Land: secondary categories 1 – 5.(7-1-24)

b.Secondary category means the categories established and described in Rules 510, 511, and 512 of

c.See Conversion Table at https://tax.idaho.gov.(7-1-24)

02.Cross Reference. See Rules 509, 510, 511, and 512 of these rules.(7-1-24)

IDAPA 35.01.03.131 Use of Ratio Study or Other Method to Test for Equalization in Counties

Section 63-109, Idaho Code Equalization Ratio Study - Primary Categories Other than Agricultural Land. Each year the Tax Commission will conduct a ratio study to assist in the equalization of assessments of property within and among the primary categories, other than agricultural land, established in Rule 130 of these rules. The ratio study is conducted in accordance with the “Standard on Ratio Studies” and the “Standard on Verification and Adjustment of Sales” both referenced in Rule 003 of these rules.(7-1-24)

a.The annual ratio study will test assessments as of January 1 of each year. Assessments are tested using sales occurring between October 1 of the year preceding the year for which assessments are to be tested and September 30 of the year for which assessments are tested. Alternate time frames may be used when sales must be added to improve representativeness, or when an alternate study, as described in Subsection 09 of this rule, is to be used. Each sale price is adjusted for time and compared to market value for assessment purposes for the year for which assessments are to be tested. To improve representativeness, the Tax Commission may use sales from extended time periods, may add or delete sales, and may add appraisals when data is lacking. Equalization ratio studies must consist of at least five (5) sales and/or appraisals. Sales should be considered as potentially valid if a financial institution is the seller, provided that criteria found in the Standard on Verification and Adjustment of Sales are met.

b.The study will be completed annually in March and notice provided to county official in accordance with Section 63-109, Idaho Code. For non-agricultural categories, the appropriate ratio study statistical measure of level is the median. For agricultural land categories, level of assessment is to be determined as described in Paragraph 131.02.b. of this rule.(7-1-24)

02.Equalization Study – Agricultural Land. Each year the Tax Commission will conduct a study to assist in the equalization of assessments of agricultural land. Any such study will analyze agricultural land values throughout each significant secondary agricultural land category using valuation methods found in Section 63-602K, Idaho Code, and Rule 617 of these rules. A secondary agricultural land category having at least ten percent (10%) of the acreage and at least five percent (5%) of the value of the primary agricultural land category is considered significant.(7-1-24)

a.County officials will receive notice of the results and compliance in accordance with Section 63- 109, Idaho Code.(7-1-24)

b.Significant secondary agricultural land categories are subject to preliminary and follow-up studies of assessment level and are studied based on the valuation methodology described in Rule 617 of these rules. The preliminary study is a comparison to the prior year’s assessed values. The follow-up studies will test the current year’s assessed values and are required when preliminary studies indicate a level of assessment less than ninety percent (90%) or greater than one hundred ten percent (110 %) of market value for assessment purposes. Categories meeting these criteria, and those categories not considered significant in a county, are in compliance. Level means the ratio of the median per acre assessed value and the median per acre value for the secondary agricultural land category determined by the Tax Commission using the valuation methodology found in Rule 617 of these rules.(7-1-24)

c.Secondary agricultural land categories may also be subject to follow-up studies if the Tax Commission has received information indicating that county boards of equalization have changed values in such a way as to produce likely non-compliance.(7-1-24)

03.Timing and Notification. Notice of improper assessment of any category is to occur when any category tested for equalization purposes is found out of compliance as described in this Rule. Following the first Monday in April statutory deadline for notice, additional notice will be provided as follows:(7-1-24)

a.By the second Monday in May, the Tax Commission will notify county assessors and commissioners of results of any additional ratio studies requested by county assessors. These studies will be based on current year assessments.(7-1-24)

b.By the fourth Monday in July, the Tax Commission will notify county assessors and commissioners of the results and compliance status based on follow-up studies as provided in Subsections 05 and 06 of this Rule.

c.See Timing and Notification Table at https://tax.idaho.gov.(7-1-24)

04.Tested for Equalization. Except as provided in Subsection 131.05 of this rule, categories, other than agricultural land to be tested for equalization purposes, are the primary categories described in Subsection 130.01 of these rules.(7-1-24)

05.Follow-Up Ratio Study. If the annual ratio study indicates that assessments in any primary category are out of compliance with the standards of this rule, a follow-up study is required. In addition, if the Tax Commission is informed that a county board of equalization has implemented changes to assessments, likely resulting in a category failing compliance with the standards for the current year’s assessments, a follow-up study is also required. A follow-up ratio study tests the assessments for January 1 of the year following the timeframe used in the preliminary agricultural study or the annual ratio study. The follow-up study uses property sales during the calendar year immediately preceding that date, unless use of an alternate time frame for sales will provide a more representative study.(7-1-24)

06.Notice of Follow-Up Ratio Study. The Tax Commission will notify the county commissioners, the county board of equalization, and the county assessor of the results of any follow-up study. The notification will include a description of assessment changes if such changes initiated the follow-up study. The notice will specify the compliance status of each category and will state whether and why the Tax Commission considers adjusting noncompliant categories based on the annual or follow-up ratio studies at the State Board of Equalization meeting.

07.Use of Ratio Study Results. If the results of any ratio study show, with reasonable statistical certainty as defined in Subsection 131.11 of this rule, that the assessments are not equalized, the Tax Commission may, at its meeting pursuant to Section 63-108, Idaho Code, order the county auditor to adjust the value of property in the non-compliant category or categories or any portion of such category. Any adjustment factor recommended to the Tax Commission will be calculated by dividing the median level of assessment in the category or categories into one hundred percent (100%). Except as provided in Subsections 131.02 or 131.08 of this rule, adjustment will not be considered for any secondary category that does not have at least one (1) observation.(7-1-24)

08.Exception from Requirement for at Least One (1) Observation for Use of Secondary Category in Adjusted Value Determination. If the ratio study results warrant an adjustment to the assessed values of the primary residential category, secondary category 10 will receive a similar adjustment if at least one (1) property observation occurs in either category 12 or 15. Such adjustment is also warranted to the assessed values in secondary category 31 if at least one (1) observation occurs in secondary category 34 or 37.(7-1-24)

09.Use of Alternate Ratio Study. When the follow-up ratio study required by Subsection 131.05 of this rule does not measure the true assessment level, the Tax Commission may consider adjustments based on the most recent ratio study or other information relevant to equalization.(7-1-24)

10.Submission of Additional Information. Any party may request that the Tax Commission consider any information or studies relevant to equalization. Such a request will include a description of the information to be presented and conclusions drawn from the information.(7-1-24)

11.Reasonable Statistical Certainty. For the purposes of equalization of primary categories other than agricultural categories, “reasonable statistical certainty” that any primary category is not equalized is found if:

a.The median ratio for the category(ies) being tested is less than ninety percent (90%) or greater than one hundred ten percent (110%) and a ninety percent (90%) two-tailed confidence interval around the median fails to include ninety percent (90%) or one hundred ten percent (110%); or(7-1-24)

b.An eighty percent (80%) two-tailed confidence interval around the median fails to include ninety percent (90%) or one hundred ten percent (110%) and this failure has continued for the current and most recent two year’s ratio studies on the category(ies).(7-1-24)

12.Cross References. See Rules 130, 510, 511, 512, and 617.(7-1-24)

IDAPA 35.01.03.132 (Reserved)

IDAPA 35.01.03.217 Rules Pertaining to Market Value Duty of County Assessors

Section 63-208 Idaho Code

01.Market Value.(7-1-24)

a.The assessor will value the entire fee simple interest of property.(7-1-24)

b.Personal property is valued at retail level.(7-1-24)

02.Appraisal Approaches. Three (3) approaches to value are considered for all property and are the sales comparison approach, the cost approach and the income approach.(7-1-24)

03.Appraisal Procedures. Assessors will use guidelines and publications of nationally recognized appraisal and valuation associations, institutes, and societies including those referenced in Rule 003 of these rules, to determine market value for assessment purposes.(7-1-24)

04.Determining Value. The income approach to value, used in appraisal procedures, methods, and techniques, to determine market value for assessment purposes of income-producing properties, must use market rent, not contract rent.(7-1-24)

IDAPA 35.01.03.218 Assessor's Plat Book

Sections 31-2709, 50-1304, 55-1603, 55-1901, 55-1911, 6 3-209, 63-210, 63-212, 63-219, 63-307, Idaho Code

01.Plat Maps. The assessor will prepare plat maps for all land.(7-1-24)

a.Plat maps may be drafted and maintained either in paper or digital format.(7-1-24)

b.Plat maps of townships, sections, aliquot parts, subdivisions, and parcel boundaries completed after July 1, 2013, are updated and maintained in accordance with the “Manual of Surveying Instructions” referenced in Rule 003 of these rules.(7-1-24)

c.Parcel numbers and all other desired information are maintained in digital or paper formats.

Annotative information is added as necessary and, if plotted by computer, is of appropriate font style and size to be easily readable. The minimum letter height is one point two five (1.25) millimeters.(7-1-24)

02.Section Outlines. Are mapped according to:(7-1-24)

a.Technical descriptions of Bureau of Land Management, formerly the General Land Office (GLO), surveys, Section 31-2709, Idaho Code;(7-1-24)

b.Descriptions on recorded surveys, Sections 55-1901 through 55-1911, Idaho Code;(7-1-24)

c.Recorded corner perpetuation records, Sections 55-1603 through 55-1612, Idaho Code;(7-1-24)

d.Recorded subdivision plats and assessor’s plats, Sections 50-1301 through 50-1330, 63-209, and 63-210(2), Idaho Code;(7-1-24)

e.Deeds or contracts with metes and bounds descriptions, Section 31-2709, Idaho Code;(7-1-24)

f.Highway, railroad, and other engineering quality route surveys;(7-1-24)

g.Relevant court decisions; and(7-1-24)

h.Unrecorded data from registered land surveyors, Section 31-2709, Idaho Code.(7-1-24)

03.Subdivisions of Sections. Are mapped in accordance with Sections 31-2709 and 63-209, Idaho

04.Map Scales.(7-1-24)

a.Non-computer and computer generated maps are scaled using the following standards:(7-1-24)

i.One (1) township at one (1) inch = fourteen thousand four hundred (14,400) inches (1,200 feet), 1:14,400;(7-1-24)

ii.Four (4) sections at one (1) inch = four thousand eight hundred (4,800) inches (400 feet), 1:4,800; one (1) section at one (1) inch = twenty four hundred (2400) inches (200 feet), 1:2,400; and(7-1-24)

iii.One (1) quarter section at one (1) inch = twelve hundred (1,200) inches (100 feet), 1:1,200.

b.Mapping completed using aerial photographs will have the scale recalculated and shown on the

map.(7-1-24)

c.Plat maps of subdivision, townsite, and metes and bounds parcels are mapped to include the basis of bearing with monuments and their coordinates relative to the “Idaho Coordinate System” as described by Sections 31-2709, 50-1301, 50-1303, and 50-1304, Idaho Code.(7-1-24)

d.Drafting of plat titles, subdivision names, and parcel dimensions are drafted on paper or digital form at an appropriate scale. The minimum letter height is one point two five (1.25) millimeters.(7-1-24)

05.Property Ownership Records. Demonstrate current ownership records.(7-1-24)

a.Ownership notations include the reputed owner of the property, or note that the owner is unknown, or list other persons with interests of record. Ownership may be ascertained from numerous recorded sources as described in Sections 63-212 and 63-307, Idaho Code.(7-1-24)

b.Purchasers, agents, guardians, executors, administrators, heirs, and claimants may have their names inserted with the recorded owner’s name as described in Sections 63-212 and 63-307, Idaho Code.(7-1-24)

IDAPA 35.01.03.219 Uniform Parcel Numbering System

Sections 63-209, 63-210, 63-219, Idaho Code Definitions. The following definitions apply to this rule.(7-1-24)

a.Parent parcel is a parcel of land in its original state prior to being segregated. The parcel may be described by a metes and bounds description, lot and block, aliquot part, or government lot.(7-1-24)

b.Child parcel is a parcel of land which has been segregated from the parent parcel. At the time a parent parcel is segregated into one or more parts, the parcels being segregated from the parent parcel are known as child parcels. The child parcel may be described by a metes and bounds description, a portion of a lot and block, a portion of an aliquot part, or a portion of a government lot.(7-1-24)

02.Parcel Number Assignment. Each parcel is assigned a parcel number that will appear on the plat map and on a companion sheet. This assigned parcel number may also be known as the tax parcel number. (7-1-24)

03.Parcel Number Upon Property Transfers. As long as the property boundary does not change, the new owner's name is assigned to the same parcel number on the companion sheet. A parcel number that exists at the time a property is split or combined may be terminated and new child numbers assigned.(7-1-24)

04.Property Split by County Line, Section Line, or Tax Code Area Boundary. Properties contiguous under common ownership but split by county line or tax code area boundary will require separate parcel numbers. Properties contiguous under common ownership but split by section or township line(s) and entirely located within the same county and tax code area will not require separate parcel numbers and the lowest section number is included in the parcel number as explained in Paragraph 219.05.c. of this rule.(7-1-24)

05.Rural Land Not Subdivided. Assign parcel numbers to rural land that is not subdivided as

a.Positions 1, 2, and 3 are the township descriptor minus the “T.”(7-1-24)

b.Positions 4, 5, and 6 are the range descriptor minus the “R.”(7-1-24)

c.Positions 7 and 8 are the section number. For properties contiguous under common ownership and split by section line(s) so that the parcel is located in multiple sections, the lowest section number is used. If the section number is less than ten (10), the section number is in position 8, preceded by a zero (“0”) in position 7.

d.Positions 9, 10, 11, and 12 are the quarter section numbers. To assign the quarter section number, begin numbering in the northeast quarter (NE1/4) of the northeast quarter (NE1/4) and proceed counterclockwise.

Starting in the NE1/4 of the section the numbers used range from zero to two thousand three hundred ninety-nine (0000 to 2399). Continuing counterclockwise, beginning in the NE1/4 of the northwest quarter (NW1/4), the numbers continue from two thousand four hundred to four thousand seven hundred ninety-nine (2400 to 4799), then, starting in the NE1/4 of the southwest quarter (SW1/4), assign numbers from four thousand eight hundred to seven thousand one hundred ninety-nine (4800 to 7199), and beginning in the NE1/4 of the southeast quarter (SE1/4), assign quarter section numbers from seven thousand two hundred to nine thousand nine hundred ninety-nine (7200 to 9999).

06.Urban Land not Subdivided. Assign parcel numbers to urban land that is not subdivided as

a.Position 1 is the city letter. Each city will have a unique letter.(7-1-24)

b.Positions 2, 3, 4, 5, and 6 are the number zero (“0”).(7-1-24)

c.Positions 7 and 8 are the section number. Number these positions as directed in Paragraph 219.05.c. of this rule.(7-1-24)

d.Positions 9, 10, 11, and 12 are the quarter section number. Number these positions as directed in Paragraph 219.05.d. of this rule.(7-1-24)

e.When a metes and bounds parcel inside city limits is being numbered, positions 9, 10, 11, and 12 locate the parcel to the nearest quarter section.(7-1-24)

f.If a government lot is within a section, or an extended government lot is an extension of a section, the quarter section numbering is assigned as rural land not subdivided. For a government lot within a quarter section, the assigned number is a number within the sequence of numbers for the quarter section. For an extended section, the assigned number is within the sequence from the exte nded quarter section.(7-1-24)

07.Subdivided Rural Land. Assign parcel numbers to subdivided rural land as follows:(7-1-24)

a.Position 1 is the number zero (“0”).(7-1-24)

b.Positions 2, 3, 4, and 5 are the subdivision number. The subdivision number will not contain alphabetic characters. Each subdivision, whether the original townsite or new subdivision, is assigned a four (4) digit number.(7-1-24)

c.Positions 6, 7, and 8 are the block number.(7-1-24)

d.Positions 9, 10, and 11 indicate the lot number designated on the subdivision plat or an assigned number if characters on the subdivision plat are not acceptable as a parcel number.(7-1-24)

e.Position 12 is the number zero (“0”) if the lot is as originally platted. If a lot has been split once or combined once, then this becomes the letter “A.” If split a second time, the letter becomes a “B,” and so on. These splits or combinations are listed on the companion sheet.(7-1-24)

08.Subdivided Urban Land. Assign parcel numbers to subdivided urban land as follows:(7-1-24)

a.Position 1 is the city letter. Each city will have a unique letter.(7-1-24)

b.Positions 2, 3, 4, and 5 are the subdivision number. The subdivision number will not contain alphabetic characters. Each subdivision, whether the original townsite or a new subdivision, is assigned a four (4) digit number.(7-1-24)

c.Positions 6, 7, and 8 are the block number.(7-1-24)

d.Positions 9, 10, and 11 indicate the lot number designated on the subdivision plat or an assigned number if characters on the subdivision plat are not acceptable as a parcel number.(7-1-24)

e.Position 12 is the number zero (“0”) if the lot is as originally platted. If a lot has been split once or combined once, then this becomes the letter “A.” If split a second time, the letter becomes a “B,” and so on. These splits or combinations are listed on the companion sheet.(7-1-24)

f.When one (1) whole lot and part of another adjoining lot are under common ownership, one (1) parcel number may be assigned. That parcel number is written using the whole lot's number and position 12 is a letter.

09.Patented Mines and Patented Mining Claims. Assign parcel numbers to patented mines and mining claims as follows:(7-1-24)

a.Positions 1 and 2 are the number nine (“9”).(7-1-24)

b.Positions 3 through 8 denote the township and range, as in the land not subdivided format. (7-1-24)

c.Positions 9 through 12 are a county assigned sequential account number for individual mines.

10.Condominiums. Assign parcel numbers to condominiums as follows:(7-1-24)

a.Condominiums in a city will have a letter in position 1 of the parcel number. The letter is unique for each city. For condominiums not in any city, position 1 is the number zero (“0”).(7-1-24)

b.Positions 2, 3, 4, and 5 indicate the condominium number and is four (4) digits. To differentiate between condominiums and subdivisions, numbers 0001 through 8999 are to be used for subdivisions, and numbers 9000 through 9999 for condominiums. Fill positions preceding the number with zeros to occupy all four (4) positions (“0000”).(7-1-24)

c.Positions 6, 7, and 8 are the block or building number. Position 6 may be a “C ” to dif ferentiate between a typical block or building number and a condominium common area.(7-1-24)

d.Positions 9, 10, and 11 are the lot or unit number designated on the condominium plat or an assigned number. An assigned condominium plat number may be used if numbers comply with the parcel numbering system.(7-1-24)

e.Position 12 is the number zero (“0”) if the parcel has not been modified since originally platted. If it has been split once or combined once, then this character becomes an “A.” If split a second time, the character becomes a “B,” and so on. These splits or combinations are listed on the companion sheet.(7-1-24)

IDAPA 35.01.03.220 Rules Pertaining to Assessment of Internal Revenue Code (irc) Section 42

LOW-INCOME PROPERTIES.

Section 63- 205A, Idaho Code

a.Amount of Housing Tax Credits. The Housing Tax Credits divided by the number of years of the term of the Tax Credit Regulatory Agreement.(7-1-24)

b.Asset Management Fee.An annual fee paid to the limited partner for property management oversight, tax credit compliance monitoring, and related services.(7-1-24)

c.Audit Fee. The fees and costs that may be charged by accountants for preparation and review of financial statements on behalf of the owner or investor.(7-1-24)

d.Compliance Fee. The fees and costs, if any, that may be charged by the Idaho Housing Financing Association (IHFA), or its agent, for review and inspection of the owner’s records, or the physical inspection of the project, as are required by the Regulatory Agreement or federal law.(7-1-24)

e.Existing Section 42 Project. A Section 42 low-income project for which Housing Tax Credits were entirely distributed before January 1, 2009.(7-1-24)

f.Federal Project Based Assistance means:(7-1-24)

i.Rental assistance of any kind provided by the Department of Housing and Urban Development or other agencies of the United States federal government which allow for rental assistance payments to the owner on behalf of the project and not on behalf of any individual tenant; or(7-1-24)

ii.Apartment projects that have federal financing at below market terms at the time when the financing was put in place, which financing is transferable without change in terms and conditions to subsequent transferees; or(7-1-24)

iii.Apartment projects that receive financing from the federal Hope VI programs administered under 42 USC section 1437v.(7-1-24)

g.Financial Statements. Profit and loss statements, or equivalent reports, that include a detailed schedule showing income and expense line items, the project’s rent roll showing the rent charged for each unit, and a copy of the IHFA’s Annual Occupancy Report that is submitted annually by each project’s owner or agent to the IHFA.(7-1-24)

h.General Partner Fee. The portion of cash flow that is paid to the general partner to compensate the general partner for managing the partnership’s operating assets and coordinating the preparation of the required IHFA’s, federal, state, and local tax and other required filings and financial reports.(7-1-24)

i.Housing Tax Credits. The final total federal income tax credits as shown on the first year’s form 8609 and allocated by the IHFA to the project either in an original allocation or a new allocation and reported to the Tax Commission by the IHFA.(7-1-24)

j.Tax Credit Regulatory Agreement. The original agreement, or the extended agreement, between the section 42 project owner and the IHFA.(7-1-24)

02.Financial Statements to be Provided by the Owners. The Tax Commission will forward to the assessor all financial statements received from the owners of section 42 properties and the information received from IHFA by April 15 as described in Section 63-205A, Idaho Code.(7-1-24)

03.Cross Reference. See Brandon Bay, Ltd. Partnership v. Payette County, 142 Idaho 681, 132 P.3d 438 (2006).(7-1-24)

IDAPA 35.01.03.221 (Reserved)

IDAPA 35.01.03.225 Documentation for Newly Organized or Altered Taxing Districts or

REVENUE ALLOCATION AREAS UNDER THE JURISDICTION OF URBAN RENEWAL AGENCIES.

Sections 31-1411, 50-2907, 50-2908, 63-215, 63-807, 63-1202, 63-3029B, 63-3638, Idaho Code

01.Definitions. The following definitions apply for cities, taxing districts, or revenue allocation areas under the jurisdiction of urban renewal agencies being formed or altering boundaries.(7-1-24)

a.Alter or any derivatives of the word as used in Section 63-215, Idaho Code, means annex, deannex, or consolidate or derivatives of these words.(7-1-24)

b.Contiguous means being in actual contact or touching along a boundary or at a point and is synonymous with abutting on.(7-1-24)

c.De-annex means to delete or remove a portion but not all of a boundary for a taxing district or revenue allocation area by completing all legal requirements to establish a new boundary for the taxing district or revenue allocation area.(7-1-24)

d.Disincorporate means completing all legal requirements to end the existence of a city.(7-1-24)

e.Dissolve or any derivatives of the word as used in Section 63-3638, Idaho Code, means completing all legal requirements to end the existence of a taxing district or revenue allocation area.(7-1-24)

f.Legal description means a narrative that describes, by metes and bounds, a definite boundary of an area of land that can be mapped on a tax code area map and shall include:(7-1-24)

i.Section, township, range, and meridian;(7-1-24)

ii.An initial point, being a government surveyed corner, such as a section corner, quarter corner, or mineral survey corner;(7-1-24)

iii.A true point of beginning, defined by bearings and distances from the initial point, that begins a new taxing district, revenue allocation area, or any alteration thereto; and(7-1-24)

iv.Bearings and distances that continuously define the boundary of any area with a closure accuracy of at least one (1) part in five thousand (5,000). Variations from this closure requirement may be approved by the Tax Commission if the description is sufficiently certain and accurate to ensure that the property is assigned to the proper tax code area. Such variations may include:(7-1-24)

(1)Boundaries which follow mountain ranges, rivers, highways, lakes, canals and other physical features that are clearly delineated on published U.S. Geological Survey quadrangle maps at scale 1:24,000; or (2)References to cardinal directions, government survey distances, and section or aliquot part corners; or(7-1-24)

(3)References to recorded subdivision or town site plats, with copies of such plats; or(7-1-24)

(4)Legislatively established boundaries as defined by reference to Idaho Code sections; and (7-1-24)

v.The legal description to annex to or deannex from an existing taxing district or revenue allocation area shall plainly and clearly define the boundary lines of the deannexed or annexed area and include a reference to existing boundaries where contiguous.(7-1-24)

g.Map prepared in a draftsman-like manner means an original graphic representation or precise copy matching the accompanying legal description and drafted to scale using standard mechanical drawing instruments or a computer. The map shall include:(7-1-24)

i.Section, township, range, and meridian identifications;(7-1-24)

ii.North arrow, bar scale, and title block;(7-1-24)

iii.District name and ordinance number or order date;(7-1-24)

iv.Bearing and distance annotation between boundary points or a legend or table identifying the bearing and distance between each set of boundary points;(7-1-24)

v.Clearly defined boundary lines of the newly formed city, taxing district, or revenue allocation area or of the alteration to an existing one together with reference to the existing boundary where contiguous; and

vi.Variations from the requirements of Paragraph 225.01.g. of this rule for what must be included on the map may be approved by the Tax Commission if the map is sufficiently certain and accurate to ensure that the property is assigned to the proper tax code area.(7-1-24)

h.A countywide taxing district is a taxing district having the same boundaries as one (1) or more counties.(7-1-24)

02.Documentation to Be Filed for Newly Created or Altered Taxing Districts or Revenue Allocation Area. The following documentation shall be filed with the county assessor, county recorder, and the Tax Commission no later than thirty (30) days following the effective date of any action creating or altering a taxing district or revenue allocation area boundary, but no later than January 10 of the following year when any action creating or altering said boundary occurs after December 10.(7-1-24)

a.A legal description which plainly and clearly defines the boundary of a newly formed taxing district or revenue allocation area or the boundary of an alteration to an existing one.(7-1-24)

b.A copy of a map prepared in a draftsman-like manner, or a record of survey as defined in Section 55-1902, Idaho Code, which matches the legal description.(7-1-24)

c.A copy of the ordinance or order effecting the formation or alteration.(7-1-24)

d.For fire districts annexing territory within an existing fire district and/or city, a copy of the written approval from that existing fire district and/or city.(7-1-24)

e.In cases where newly created taxing district boundaries are countywide a copy of the ordinance or order effecting the formation which clearly states that the newly formed district is to be countywide shall fulfill the requirements of documents to be filed in Paragraphs 225.02.a. through 225.02.c. of this rule.(7-1-24)

03.Documentation to Be Filed for Disincorporated Cities, Dissolved Taxing Districts, or Terminated Revenue Allocation Areas.(7-1-24)

a.No later than thirty (30) days following the effective date of the final action disincorporating a city or dissol ving a taxing district or revenue allocation area, but no later than January 10 of the following year if the final action occurs after December 10, for the distributions of revenue as provided for in Sections 50-2908, 63-1202, 63- 3029B and 63-3638, Idaho Code, the disincorporating, or dissolving entity shall file a copy of the ordinance or order causing the disincorporation or dissolution with the county assessor, county recorder and the Tax Commission.

b.Upon receipt of the ordinance or order from a disincorporating city or dissolving taxing district, or in the case of a revenue allocation area, upon notification of revenues sufficient to cover expenses as provided in Section 50-2903(5), Idaho Code, the Tax Commission shall prepare and send a list of the affected tax code area number(s) to the city, taxing district, or urban renewal agency and to the appropriate assessor(s) and recorder(s) within thirty (30) days except for any ordinance, order, or notification received after January 1 when the list shall be sent by the fourth Friday of January.(7-1-24)

c.After fourteen (14) days from the date of the mailing of the list of the affected tax code area(s), the Tax Commission shall process the disincorporation, dissolution, or termination unless it receives a response from the disincorporating city, or dissolving taxing district, appropriate urban renewal agency, appropriate recorder(s) or appropriate assessor(s) that an error exists in the identification of the tax code area(s).(7-1-24)

d.For revenue allocation areas formed prior to July 1, 2011, within thirty (30) days of one (1) year prior to the termination date found in the formation ordinance or the date the revenue allocation area has been in existence for twenty-three (23) years, the Tax Commission will notify the urban renewal agency of the date the revenue allocation area is considered terminated. Such notice shall include a statement indicating that the revenue allocation area may remain in existence if necessary to pay off existing bonded indebtedness, provided that, within thirty (30) days of receipt of this notice, the urban renewal agency notifies the Tax Commission of such bonded indebtedness.(7-1-24)

e.For the revenue allocation area formed beginning July 1, 2011, the notification procedures in Paragraph 225.03.d. of this rule shall be initiated within thirty (30) days of one (1) year prior to the termination date found in the formation ordinance or the date the revenue allocation area has been in existence for twenty (20) years.

04.Digital Map Information. Digital map information in a format usable by the Tax Commission may be submitted in addition to or as a substitute for any cloth, film, or paper copy maps. Such information shall be accompanied by metadata that clearly defines map projection, datum and attributes.(7-1-24)

05.Deadline for Completion. December 31 of the current year shall be the deadline for completing any action that creates, alters, or dissolves any taxing district or terminates a revenue allocation area or creates, alters, or disincorporates any city.(7-1-24)

06.Approval of Property Tax Levy or Revenue Allocation . For the purpose of levying property taxes or receiving revenue allocations, no newly formed or altered city , taxing district, or revenue allocation area shall be considered formed or altered by the Tax Commission if it:(7-1-24)

a.Fails to provide the correct documentation plainly and clearly designating the boundaries of a newly formed city, taxing district, or revenue allocation area or of an alteration to an existing one; or(7-1-24)

b.Fails to provide the correct documentation in sufficient time for the Tax Commission to comply with Rule 404 of these rules; or(7-1-24)

c.Has boundaries which overlap with like taxing districts or revenue allocation areas.(7-1-24)

d.Is a revenue allocation area that has had one (1) previous annexation on or after July 1, 2011, and is requesting to annex additional area.(7-1-24)

07.Notification. Notification required pursuant to Section 63-215, Idaho Code, is sent to affected taxing districts, urban renewal agencies, and to any auditor(s) and assessor(s) of the involved county(ies).(7-1-24)

08.One Uniform System. The Tax Commission will prepare one (1) uniform system of tax code area numbers and maps which shall be used by each county.(7-1-24)

09.Tax Code Areas. The Tax Commission shall create a separate, unique number for each tax code area. If any area annexed to an existing revenue allocation area includes a taxing district with any fund which is not to be used to generate funds to be distributed to an urban renewal agency, the boundaries of the area added to the existing revenue allocation area shall constitute a separate tax code area.(7-1-24)

10.Furnished By The Tax Commission.(7-1-24)

a.Annually, the Tax Commission will post the following documents on the Tax Commission’s website:(7-1-24)

i.Updated tax code area maps;(7-1-24)

ii.Updated taxing district maps;(7-1-24)

iii.Updated revenue allocation area maps; and(7-1-24)

iv.Documentation of changes related to the above maps.(7-1-24)

b.Upon specific request, the Tax Commission will furnish without charge, one (1) hardcopy set of the above documents to each appropriate assessor, recorder, treasurer, and entity with operating property assessed by the Tax Commission. There shall be a charge for all other hardcopy maps.(7-1-24)

IDAPA 35.01.03.226 (Reserved)

IDAPA 35.01.03.230 Extensions of Statutory Deadlines for Disaster Relief

Section 63-220, Idaho Code

01.Application by County Officials. A county official will apply for an extension in writing to the Tax Commission before the statutory deadline, and the application will include the following:(7-1-24)

a.A description of the nature of the relief granted, or expected to be granted, to taxpayers pursuant to Section 63-220(1), Idaho Code, by the Board of County Commissioners;(7-1-24)

b.Identification of any statutory deadline germane to the requested extension;(7-1-24)

c.The date by which the official making the application expects to accomplish the action specified in the extension application; and(7-1-24)

d.A request that the Tax Commission approve the delay sought.(7-1-24)

02.Procedure. Within five (5) working days of receipt of the request, the Tax Commission will respond in writing to the official requesting the delay. The Tax Commission will approve any request for an extension that complies with this rule.(7-1-24)

IDAPA 35.01.03.231 (Reserved)

IDAPA 35.01.03.304 Manufactured Home Designated as Real Property

Sections 63-304, 63-305, Idaho Code

01.Statement of Intent to Declare (SID).(7-1-24)

a.For new manufactured homes, the assessor will verify that sales or use tax has been collected or will collect such tax. Any sales or use tax collected by the assessor is remitted to the Tax Commission.(7-1-24)

b.The assessor will forward a copy of the SID form and the title or Manufacturer’s Statement of Origin (MSO) to the Idaho Transportation Department. The Idaho Transportation Department will cancel the title.

02.Reversal of Declaration of Manufactured Home as Real Property. The assessor will transmit to the Idaho Transportation Department a copy of the completed Reversal of Declaration of Manufactured Home as Real Property form, title report with appropriate signatures of consent, and the application for title to the manufactured home.(7-1-24)

03.Definition of Permanently Affixed. In the year any manufactured home is to be declared to be real property, permanently affixed means complying with the Idaho Manufactured Home Installation Standard as adopted by IDAPA 07.03.12, “Rules Governing Manufactured Home Installations,” Section 004.(7-1-24)

04.Status of Manufactured Housing Previously Declared Real. All manufactured housing upon which a “non-revocable option to declare the mobile home as real property” or SID was correctly completed and properly recorded and filed is treated as real property until such time as a reversal (as provided for in Section 63-305, Idaho Code, and this rule) is correctly completed and properly recorded and filed. This status as real property is based on all criteria existing when said manufactured housing was originally declared real property. This property must be treated as real property and considered “permanently affixed” without any need to be retrofitted to comply with subsequent changes to the requirements for “permanently affixed,” including changes to the Idaho Manufactured Home Installation Standard as adopted by IDAPA 07.03.12, “Rules Governing Manufactured Home Installations,”

Section 004, that occur after the manufactured home was originally declared real property.(7-1-24)

IDAPA 35.01.03.305 (Reserved)

IDAPA 35.01.03.312 Partial Year Assessment of Real and Personal Property

Sections 63-311, 63-602Y, Idaho Code Change of Status. The real or personal property that has a change of status as described in Section 63-602Y, Idaho Code, includes exempt governmental property.(7-1-24)

02.Cross Reference. Partial year assessments. If the assessor is notified of taxable personal property entering the county after the lien date, the assessor may place the property on the subsequent or missed property roll.

Consequently, if the assessor is notified that previously reported taxable personal property is no longer subject to property tax prior to the end of the calendar year, the assessor will adjust the subsequent or missed property roll accordingly. See Idaho Supreme Court decision in Xerox Corporation v. Ada County Assessor, 101 Idaho 138, 609 P.2d 1129 (1980).(7-1-24)

IDAPA 35.01.03.313 (Reserved)

IDAPA 35.01.03.314 County Valuation Program to Be Carried on by Assessor

Sections 63-314, 63-316, Idaho Code

a.Continuing program of valuation means the program by which each assessor completes the assessment of all taxable properties each year.(7-1-24)

b.The field inspection will include an observation of the physical attributes of all structures which significantly contribute to the property value, the visible land amenities, and a notation of any other factors which may influence the market value of any improvements.(7-1-24)

c.Index refers to any annual adjustment or trending factor applied to existing assessed values to reflect current market value. Ratio studies or other market analyses can be used to develop indexes based on property type, location, size, age or other characteristics.(7-1-24)

d.As used in Section 63-314, Idaho Code, prediction of market value means an estimate of market value.(7-1-24)

e.Category to be Assessed at Current Market Value. The level of assessment of each category is considered current market value unless there is reasonable statistical certainty that the category is not equalized pursuant to Section 63-109, Idaho Code, and Rule 131.(7-1-24)

02.Plan for Continuing Program of Valuation. The plan for continuing program of valuation will include:(7-1-24)

a.A parcel count by category, the number of parcels to be appraised each year, maps that show each of the market areas, an analysis of staff requirements, a budget analysis that provides adequate funding for labor costs, capital and supply costs, travel and education costs and the method of program evaluation.(7-1-24)

b.A market data bank includes a collection, verification and analysis of sales, income and expense data, building cost information, and application of this information to estimate market value. To mail assessment notices by the first Monday in June as required by Section 63-308, Idaho Code, assessors should include income and expense data submitted by property owners by the first Monday in April. Income and expense data for low-income housing properties receiving tax credits under Section 42 of the Internal Revenue Code includes actual rents, the monetary benefit of income tax credits, and expenses.(7-1-24)

c.Maps prepared in accordance with Section 63-209, Idaho Code, which identify characteristics of each geographic area.(7-1-24)

d.A property record for each parcel, complete with the assigned secondary category and property characteristics necessary for an estimate of the current market value. Such characteristics may include data elements as described in the International Association of Assessing Officers (IAAO) Standard on Mass Appraisal of Real Property and the IAAO Standard on Digital Cadastral Maps and Parcel Identifiers. Common elements identified in these standards include:(7-1-24)

i.Date of most current physical review;(7-1-24)

ii.Significant improvements, buildings and structures;(7-1-24)

iii.Photographs of significant improvements;(7-1-24)

iv.Sketches and/or blue prints of significant improvements;(7-1-24)

v.Location data, such as market area, neighborhood, site amenities and external nuisances; (7-1-24)

vi.Year built, effective age and/or condition of significant improvements and(7-1-24)

vii.Land size or diagram of all taxable parcels within the county.(7-1-24)

e.The plan must be submitted to the Tax Commission on or before the first Monday of February in 2017, and every fifth year thereafter.(7-1-24)

f.As provided in Section 63-314, Idaho Code, a county may request an extension to the current five (5) year county valuation plan.(7-1-24)

i.Any request for an extension must include an amended plan incorporating an inventory of the parcels to be appraised during the period of the approved extension. This inventory will constitute the schedule of required appraisals for the initial year or years of the subsequent five (5) year valuation program. Parcels appraised during the extension are considered appraised during both the current and subsequent five (5) year plan valuation program periods, maintaining the same five (5) year cycle for all counties.(7-1-24)

ii.A county is notified of the Tax Commission's decision regarding the granting of an extension as provided in Section 63-314, Idaho Code, within thirty (30) days of receipt of the written request for the extension when accompanied by an amended plan.(7-1-24)

iii.The Tax Commission's approval of any extension will specify timing and nature of progress reports.(7-1-24)

iv.The Tax Commission can void an extension unilaterally.(7-1-24)

03.Field Inspections. The methods of observation of the physical attributes of property as described in the International Association of Assessing Officers (IAAO) “Standard on Mass Appraisal of Real Property” referenced in Rule 003 of these rules should be followed to the extent that resources are available. This includes the use of aerial photographs and other digital imaging technology tools, which may be used to supplement, but not replace physical inspections.(7-1-24)

04.Testing for Current Market Value. Assessed values are tested annually by the Tax Commission as described in Section 63-109, Idaho Code, and Rule 131 of these rules to determine whether the level of assessment reflects “current market value.”(7-1-24)

IDAPA 35.01.03.315 Use of Ratio Study to Equalize Boise School District

Sections 63-315, 33-802(6), 50-2903, Idaho Code Procedures for Boise School District Ratio Studies. The Boise School District ratio study is conducted in accordance with the “Standard on Ratio Studies” referenced in Rule 003 of these rules.(7-1-24)

a.Information on property sales, which meet the requirements of arm’s length market value sales, is assembled into samples representing designations defined in Subsection 315.02 of this rule in the Boise School District. Except when sales or appraisals must be added or deleted to improve representativeness, sales used are those occurring within the Boise School District between October 1 of the year preceding the year for which adjusted market value is to be computed and September 30 of the next year. Each sale price is adjusted for time and compared to market value for assessment purposes for the year for which adjusted market value is to be computed. The Tax Commission may use sales from extended time periods and may add appraisals when data is lacking.(7-1-24)

b.The market value for assessment purposes of the sale or appraised property is divided by the adjusted sale price or appraised value to determine the ratio.(7-1-24)

c.A statistical analysis is conducted for the sales and appraisals in each property designation described in Subsection 315.02 of this rule in the Boise School District and appropriate measures of central tendency, uniformity, reliability, and normality computed.(7-1-24)

d.If fewer than five (5) sales and appraisals are available, no adjustment to the net taxable value of the designation is made.(7-1-24)

e.If it is determined with reasonable statistical certainty that the property designation is not at market value for assessment purposes, an adjusted market value is computed for the Boise School District by dividing the net taxable value for the year for which adjusted market value is to be determined by the appropriate ratio derived from the ratio study. The appropriate ratio to be used is the weighted mean ratio calculated from the sample for each designation, unless it can be clearly demonstrated that this statistic has been distorted by non-representative ratios. In this case the median may be substituted.(7-1-24)

f.Within the Boise School District, adjusted market value for each secondary category of real, personal and operating property is summed to produce the adjusted market value for the Boise School District. The Boise School District net taxable value is divided by this adjusted market value to produce the overall ratio of assessment in the Boise School District.(7-1-24)

g.Urban renewal increment values are not included in the net taxable value for the Boise School District. Upon receipt of an urban renewal agency's resolution recommending the adoption of an ordinance for termination of a revenue allocation area by December 31 of a given year, the increment value in the immediate prior year is included in the net taxable value for the Boise School District. If the resolution is received prior to the first Monday in April, the net taxable value for the immediate prior year is adjusted by adding the increment value. If any rat io study-based adjustments are warranted, they apply to the actual value including the increment value. If the resolution is received on or after the first Monday in April, but by September 1, a corrected certification of actual and adjusted values is provided as soon as practical.(7-1-24) h.“Reasonable statistical certainty,” that the property designation in question is not at market value for assessment purposes is tested using ninety percent (90%) confidence intervals about the weighted mean or median ratios. If the appropriate confidence interval includes ninety-five percent (95%) or one hundred five percent (105%), there is not “reasonable statistical certainty” that the property designation is not at market value for assessment purposes.(7-1-24)

i.Secondary categories are assigned to designations as follows:(7-1-24)

i.Secondary categories 10, 12, 15, 18, 20, 26, 31, 34, 37, 40, 41, 46, 47, 48, 65, or 50 are residential; and(7-1-24)

ii.Secondary categories 11, 13, 14, 16, 17, 21, 22, 27, 33, 35, 36, 38, 39, 42, 43, or 51 are commercial.

j.For all secondary categories, described in Rule 510, 511, or 512 of these rules but not contained in the list in Paragraph 315.01.i. of this rule, adjusted market value will equal taxable value.(7-1-24) k.“Appraisal” or “appraised value” refers to any Tax Commission provided property appraisal.

02.Use of Property Designations. In computing the ratio for the Boise School District, the Tax Commission will designate property as residential or commercial and will assign sales and appraisals to these designations as shown in Paragraph 315.01.i. of this rule. For the Boise School District, adjusted market value is computed by dividing the appropriate ratio ascertained for each of these designations into the sum of the net taxable values for each secondary category assigned to a designation. Except as provided in Subsection 315.05 of this rule, for the net taxable value in any secondary category to be included in said sum, at least one (1) observation (sale or appraisal) from that secondary category must be present in the ratio study. If the ratio for any given designation in the Boise School District indicates that the market value for assessment purposes cannot be determined with reasonable statistical certainty to differ from statutorily required market value, the net taxable value shown on the Boise School District abstract(s) required pursuant to Subsection 315.04 of this rule for each of the secondary categories included in that designation is the adjusted market value for said designation.(7-1-24)

03.Assessor to Identify Location. Each county assessor will identify which sales submitted for the ratio study are located within the Boise School District.(7-1-24)

04.Abstracts of Value for the Boise School District. Each applicable county auditor will provide to the Tax Commission abstracts of the net taxable value of all property within the portion of the Boise School District in that county. These abstracts are submitted in the same manner and at the same time as provided for county abstracts of value.(7-1-24)

05.Exception from Requirement for at Least One Observation for Use of Secondary Category in Adjusted Value Determination. When there is an adjustment to be made to the net taxable values in the residential designation, such adjustment applies to any net taxable value in secondary category 10, provided there is at least one (1) observation (sale) of property identified in either secondary category 12 or 15. Such adjustment will also be applied to any net taxable value in secondary category 31, provided there is at least one (1) observation (sale) of property identified in either secondary category 34 or 37.(7-1-24)

06.Certification of Values. The Tax Commission certifies values under Section 63-315, Idaho Code, by publication on the Tax Commission’s web site or in an alternate format on request.(7-1-24)

07.Cross References. See rules 130, 510, 511, and 512 of these rules.(7-1-24)

IDAPA 35.01.03.316 Compliance of Continuing Valuation Program

Sections 63-314, 63-316, Idaho Code

a.Continuing appraisal means the program by which each assessor completes the assessment of all taxable properties each year. This term includes any appraising or indexing done to accomplish the continuing program of valuation as defined in Rule 314 of these rules.(7-1-24)

b.Monitor means collecting data and compiling statistical reports that show the number and percentage of parcels physically inspected at scheduled intervals within each year of each five (5) year appraisal cycle. The term “monitor” also includes an examination of and summary report of compliance with the most recently completed ratio study under Section 63-109, Idaho Code, and Rule 131 of these rules showing the status of appraisal and indexing to achieve market value.(7-1-24)

c.Progress reports mean any informational or statistical report compiled and distributed by the Tax Commission regarding the physical appraisal progress of a county.(7-1-24)

d.Appraisal cycle means consecutive five (5) year periods beginning with appraisals completed for the 1998 property roll, as established by the requirement in Section 63-314, Idaho Code.(7-1-24)

e.Remediation plan means, a written statement of the actions that the county plans to bring its continuing program of valuation into compliance with Section 63-314, Idaho Code.(7-1-24)

02.Monitoring Procedure. The Tax Commission will monitor compliance with the continuing program of valuation in each county no less than annually and prepare and distribute progress reports to each county assessor in the following manner:(7-1-24)

a.The Tax Commission will compile a progress report each July to determine compliance with Section 63-314, Idaho Code. This report will consist of an analysis of the county's progress within the current appraisal cycle and a summary report of the most recently completed ratio study showing the status of appraisal and indexing to achieve market value. The Tax State Commission will notify each county assessor on or before August 15 each year of the current status of the continuing program of valuation progress and any necessary corrective action and notify the board of county commissioners that this report was provided to the county assessor.(7-1-24)

b.Upon receipt of a written request from the county assessor, the Tax Commission will complete and distribute a six (6) month progress report in January. This January report will show the total parcels in the county, the number of parcels that need to be physically inspected for the current year's assessment, a summary report of the most recently completed ratio study, and the number of parcels upon which physical inspections were completed during the preced ing six (6) months. The Tax Commission will not use this report to determine compliance with Section 63-314, Idaho Code, but will notify the board of county commissioners that this report was provided.(7-1-24)

03.Remediation Plans. If a county does not meet the requirements of subsection (1) of 63-314, Idaho Code, according to the July progress report, the assessor and board of county commissioners will submit to the Tax Commission a remediation plan explaining how the county will achieve compliance on or before September 15. The Tax Commission will approve the plan on or before October 1 and the continuing valuation program of the county will be considered in compliance so long as the county meets the terms of the remediation plan. The Tax Commission will monitor progress toward successful completion of any remediation plan at intervals scheduled with the county assessor.(7-1-24)

04.Tax Commission To Ensure Corrective Action.(7-1-24)

a.During the first four (4) years of any appraisal cycle, if any July progress report shows that a county assessor did not meet the requirements of a remediation plan the Tax Commission will ensure corrective action is taken and may take exclusive and complete control of the continuing program of valuation pursuant to Section 63- 316, Idaho Code.(7-1-24)

b.If, at the end of any appraisal cycle a county has not achieved adequate appraisal of all parcels, the Tax Commission may ensure corrective action is taken, and may take exclusive and complete control of the continuing program of valuation pursuant to Section 63-316, Idaho Code. If no extension has been granted pursuant to the provisions of Section 63-316(6), Idaho Code, the county plan for the next appraisal cycle submitted to the Tax Commission must include provision for field inspection of those parcels not field inspected by the end of the expired appraisal cycle and an additional field inspection of the same parcels for the current plan for the continuing program of valuation.(7-1-24)

05.Compliance Procedure Examples.(7-1-24)

a.See Compliance Procedure Examples at https://tax.idaho.gov.(7-1-24)

b.See Informational Progress Report Example at https://tax.idaho.gov.(7-1-24)

IDAPA 35.01.03.317 Occupancy Tax on Newly Constructed Improvements on Real Property

Section 63-317, Idaho Code Prorated Market Value. The market value for occupancy tax purposes shall be the full market value on January 1 and shall be prorated at least monthly from the occupancy date to the end of the year.(7-1-24)

02.Notice of Appraisal. When notifying each owner of the appraisal, the county assessor shall include at a minimum the full market value before any exemptions and before any prorating of the value, the length of time subject to the occupancy tax, and the prorated value.(7-1-24)

03.Example. See example for prorated market value exceeding maximum amount of the homestead exemption for improvements subject to the occupancy tax at https://tax.idaho.gov.(7-1-24)

04.Market Value. The market value for occupancy tax purposes is entered on an occupancy tax valuation roll. Occupancy tax valuation is not included in the assessed value of any taxing district, but occupancy tax is included in the certified budget.(7-1-24)

05.Allocation to Urban Renewal Agencies. Occupancy tax revenue shall be distributed to urban renewal agencies in the same manner as property taxes, except as provided in Paragraphs 317.06.a. and 06.b. of this

a.The portion of the occupancy tax raised for funds specified in Section 50-2908, Idaho Code, and Rule 804 of these rules must be distributed to the taxing districts levying property taxes for those funds and, therefore, must not be distributed to the urban renewal agency.(7-1-24)

b.For parcels within a newly formed revenue allocation area or within an area newly annexed to an existing revenue allocation area, occupancy tax for the tax year during which the formation or annexation took effect is not distributed to the urban renewal agency.(7-1-24)

IDAPA 35.01.03.318 (Reserved)

IDAPA 35.01.03.404 Operator’s Statement -- Contents

Sections 63-401, 63-404, Idaho Code Filing Date for Operator's Statement. All taxpayers required to file an operator’s statement must file the statement with the Tax Commission by April 30 each year. The information in the statement must be reliable for preparing an estimate of market value. For each entity submitting a written request for an extension on or before April 30, the Tax Commission may grant an extension of the filing date until May 31.(7-1-24)

02.Tax Code Area Maps. By March 1 of each year, the Tax Commission will furnish to all entities having operating property within the state of Idaho, except private railcar fleets, a web link to a list of all changes in tax code area boundary lines. If the Tax Commission receives corrections to any tax code area boundaries, these changes must be furnished by March 15. Every day that the tax code area map deadline is extended beyond March 1 allows for an automatic extension in the filing requirement, equal to the delay, for the portion of the operator’s statement that includes mileage specific information reported by tax code area as required in Subsection 404.03.a. of this rule. All other operator statement information will still be required by April 30. The reporting entity will review the list of changes to identify any tax code areas, within which any of the entity’s operating property is located. The reporting entity will report, under Subsection 404.03.a. of this rule based on these identified tax code areas. The Tax Commission will provide the tax code areas maps to the reporting entity as provided for in Rule 225 of these rules.

03.Reporting of Mileage.(7-1-24)

a.In the operator’s statement, the number of miles of railroad track, electrical and telephone wire, pipeline, etc., must be reported to the hundredth mile in decimal form (0.00) in each taxing district or taxing authority and must be reported by the uniform tax code area method.(7-1-24)

b.Railroad track mileage is reported by the name of the main line and branch lines with the track mileage for the main line and branch lines reported as Main Track Miles. Track miles consisting of passing track, yard switching, spurs, sidings, etc., are reported as Secondary Track Miles.(7-1-24)

c.Electric power companies will report electric power line mileage by transmission and distribution lines. The transmission lines are the lines at a primary source of supply to change the voltage or frequency of electricity for the purpose of its more efficient or convenient transmission; lines between a generating or receiving point and the entrance to a distribution center or wholesale point; and lines whose primary purpose is to augment, integrate, or tie together the sources of power supply. The distribution lines are the lines between the primary source of supply and of delivery to customers, which are not includable in transmission lines. Cooperative electrical associations may include lines designed to accommodate thirty-four thousand five hundred (34,500) volts or more as transmission or distribution lines. Transmission or distribution lines are reported by single linear wire mile. (7-1-24)

d.Telephone companies will report on a single linear wire mile basis, and include any ground wires.

e.Natural gas and water distribution companies will report pipeline and gathering line miles on a three (3) inch comparison basis. For example, a company with five (5) miles of six (6) inch pipe will report ten (10) pipeline miles: five (5) times six (6) divided by three (3) equals ten (10) miles.(7-1-24)

f.Transmission pipeline companies will report pipeline miles on a one-inch (1”) comparison basis.

04.Situs Property. Situs property includes microwave stations and radio relay towers. This property also includes facilities, used for and in conjunction with thermal generation of electricity, constructed after January 1, 2004, and located in or within five (5) miles of an incorporated city. The investment in this property is reported in the tax code area(s), within which it is located.(7-1-24)

05.Record of Property Ownership. The following procedures apply for maintaining records of operating property ownership.(7-1-24)

a.A record of each property owned, leased, or otherwise operated by each railroad, private railcar fleet or public utility is maintained by the Tax Commission, the appropriate railroad, private railcar fleet or public uti lity, and the appropriate county assessor’s office. Each record is maintained on a form identified as STC Form R.

The Tax Commission will send a copy of each STC Form R to the appropriate company and the appropriate county assessor’s office.(7-1-24)

b.On the STC Form R, the Tax Commission will identify which property is operating property and which property is non-operating property.(7-1-24)

c.Each railroad company will file the original railroad right-of-way maps with the Tax Commission.

Each railroad will file an STC Form R, only, for property that is acquired, leased, or transferred between operating and non-operating status, or sold during the prior year.(7-1-24)

06.Cross Reference. See Sections 63-602L and 63-405, Idaho Code, and Rules 405 and 615 of these

IDAPA 35.01.03.405 Assessment of Operating Property

Section 63-405, Idaho Code The Unit Method. The unit method of valuation is preferred for valuing a railroad or public utility when the individual assets function collectively, are operated under one ownership and one management, are interdependent, and the property would be expected to trade in the marketplace as a unit. Under the unit method, the value of the tangible and intangible property is equal to the value of the going concern. The market value of the unit is referred to as the system value. For interstate property, allocation factors are used to determine what part of the system value is in Idaho.(7-1-24)

02.Identify the Unit. The unit includes all property used or useful to the operation of the system, property owned, used or leased by the business and the leased fee and leasehold interests. All title and interest in unit property is assessed to the owner, lessee or operating company.(7-1-24)

03.Appraisal Approaches. The three (3) approaches to value may be considered for all property.

04.Appraisal Procedures. Market value is determined through procedures, methods, and techniques accepted by nationally recognized appraisal and valuation organizations. For operating property, the direct capitalization techniques or derivatives thereof will not be used in estimating value.(7-1-24)

05.The Cost Approach. The appraiser may consider replacement, reproduction, original or historical cost.(7-1-24)

a.Contributions in aid of construction are valued at zero in the cost approach.(7-1-24)

b.Construction work in progress may be considered in the cost approach.(7-1-24)

c.Obsolescence. The appraiser will attempt to measure obsolescence, if any exists. If obsolescence is found to exist, it may be considered in the cost approach.(7-1-24)

06.The Income Approach. The income approach is based on the premise that value can be represented by the present worth of future benefits derived from the ownership, use or operation of the unit. The appraiser will consider yield capitalization in processing the income approach.(7-1-24)

07.The Market Approach. In the market approach, the appraiser will consider the sales comparison approach or the stock and debt approach.(7-1-24)

08.Reconciliation. Reconciliation, also called correlation, is an opinion regarding the weight that should be placed on each approach. The appropriate weight to be given each indicator is based on the appraiser’s opinion of the inherent strengths and weaknesses of each approach and the data utilized. The appraisal report will disclose the weight given to the indicators.(7-1-24)

09.Allocation. Use readily available data from existing records to calculate the factors that are multiplied by the correlated system value to allocate that value to Idaho.(7-1-24)

10.Situs Property Apportionment. For situs property, as described in Subsection 404.04 of these rules, apportionment is based on physical location, meaning the market value will not be apportioned based on mileage but only to the tax code area(s) within which said property is situs or physically located.(7-1-24)

11.Valuation of Rate-Regulated Electric Utility Property. The methods set forth in this Rule will appl y to the valuation of operating property of rate-regulated electric utility companies except to the extent any provision is inconsistent with the valuation criteria set forth in Section 63-205B, Idaho Code, in which case, the criteria in Section 63-205B, Idaho Code. will control.(7-1-24)

12.Cross Reference. See Sections 63-404 and 63-602L, Idaho Code, and Rules 404 and 615 of these

IDAPA 35.01.03.406 (Reserved)

IDAPA 35.01.03.407 Hearing to Review Operating Property Appraisals

Section 63-407, Idaho Code Procedure Governed. This rule will govern all practice and procedure before the Tax Commission sitting as a State Board of Equalization in hearings under Section 63-407, Idaho Code. Hearings are not contested cases under the Idaho Administrative Procedures Act. Hearings are open meetings under the Idaho open meetings law and all written materials are subject to Idaho public records law. The taxpayer may request that the Board of Equalization go into executive session to discuss confidential materials.(7-1-24)

02.Liberal Construction. These rules will be liberally construed to secure just, speedy and economical determination of all issues presented to the Tax Commission. For good cause the Tax Commission may permit deviation from these rules and the taxpayer may request a stipulated finding that would result in an appealable decision in lieu of a hearing before the State Board of Equalization.(7-1-24)

03.Communication. All notices and petitions required to be filed with the Tax Commission must be in writing. Each notice must identify the filing party, be signed by the filing party, be dated and give the filing party’s mailing address and telephone number. The provisions of Section 63-217, Idaho Code, apply to the filing of documents with the Tax Commission.(7-1-24)

04.Service by Tax Commission. All notices and orders required to be served by the Tax Commission may be served by mail. Service will be complete when a true copy of the document, properly addressed and stamped, is deposited in the United States mail.(7-1-24)

05.Notice to County Assessors. When the calendar of hearings under Section 63-407, Idaho Code, is final, the Tax Commission will send a copy of this calendar to the assessor of each county.(7-1-24)

06.Parties. The following are parties to a hearing of the Tax Commission meeting as State Board of Equalization.(7-1-24)

a.Petitioner. A person petitioning for a hearing will be called the petitioner.(7-1-24)

b.Staff. The Tax Commission staff may appear as a party at the hearing and may be represented by one (1) or more Deputy Attorneys General assigned to the Tax Commission.(7-1-24)

c.Legal advisor to the Tax Commission. When sitting as a State Board of Equalization, the Tax Commission may obtain legal advice from a Deputy Attorney General who is not representing the Tax Commission staff.(7-1-24)

07.Appearances and Practice. The following apply for appearances and practice in a hearing.

a.Rights of parties. At any hearing, both parties may appear, introduce evidence, ask questions through the presiding officer, make arguments, and generally participate in the conduct of the proceeding.(7-1-24)

b.Taking of appearances. The presiding officer conducting the hearing will require appearances to be stated and will see that both parties present are identified on the record.(7-1-24)

c.Representation of taxpayers. An individual may represent himself or herself or be represented by an attorney. A partnership may be represented by a partner, authorized employee or by an attorney. A corporation may be represented by an officer, authorized employee or by an attorney.(7-1-24)

08.Pre-Hearing Conferences.(7-1-24)

a.The Tax Commission may, upon notice to both parties, hold a pre-hearing conference for the following purposes:(7-1-24)

i.Formulating or simplifying the issues;(7-1-24)

ii.Obtaining admissions of fact and of documents which will avoid unnecessary proof;(7-1-24)

iii.Arranging for the exchange of proposed exhibits or prepared expert testimony;(7-1-24)

iv.Limiting the number of witnesses;(7-1-24)

v.Setting the hearing procedure, and including allocation of an amount of time for the hearing; and

vi.Reviewing other matters to expedite the orderly conduct and disposition of the proceedings.

vii.Allowing any continuance.(7-1-24)

b.Action taken. Any action taken at the conference and any agreement made by the parties concerned may be recorded and the Tax Commission may issue a pre-hearing order which will control the course of subsequent proceedings unless modified.(7-1-24)

c.Compromise and offers to compromise. Evidence of an offer or agreement to compromise the dispute and the conduct and statements made in compromise negotiations are not admissible at the hearing. (7-1-24)

09.Hearings. The following apply to the hearings.(7-1-24)

a.Request for hearing. A request for a hearing will be in writing and filed with the Tax Commission on or before July 22 of the current year. The request will state the factual and legal basis on which the request is based.(7-1-24)

i.Tax Commission staff will provide preliminary appraisals to operating property owners by June 8 of the current year unless the parties agree to a later date;(7-1-24)

b.Notice of hearing. The Tax Commission will notify both parties and all counties of the place, date and time of the hearing.(7-1-24)

c.Submission of documents and other evidence. The appealing party may submit all relevant briefs and documents for the Commissioners to consider no later than seven (7) days before the hearing date. Tax Commission staff will submit their proposed findings of fact and conclusions of law, response brief, written materials, exhibits, and other documents no later than five (5) days before the hearing date. The appealing party may then submit any other relevant documents no later than three (3) days before the hearing date. Additional information may be presented by either party at the time of their oral presentations upon agreement between the Tax Commissioners and the appealing party. Agreement must not be unreasonably withheld by either party. Such additional information is limited to subject matter and evidence provided at least seven (7) days prior to the hearing. Parties will submit one (1) electronic copy of all materials; physical copies of the materials are not required to be submitted.(7-1-24)

d.Presiding officer. The Chairman of the Tax Commission will appoint an individual who is not a member of the Tax Commission’s staff to conduct the hearing. In the absence of a conflict of interest or other good cause, this person will normally be the Commissioner overseeing the centrally assessed property section of the Tax Commission or the designee thereof. A Tax Commissioner will not vote on any matters where he has oversight.

e.The proceeding. In a non-adversarial proceeding witnesses will present evidence and arguments directly to the Tax Commissioners. The presentation may include written materials including a transcript of the witnesses’ oral statements. Copies of written materials (including copies of visual presentations) will be provided to each Tax Commissioner, the Tax Commission’s Assistant to the State Tax Commission/Board, and the Staff. At the conclusion of a witness’ testimony, Tax Commissioners may pose questions. The party with the burden of proof on the matter to be considered will present first and may make a closing presentation. This closing presentation should be limited to the subject matter and evidence presented during the proceeding.(7-1-24)

f.Testimony under oath. All testimony to questions of fact to be considered by the Tax Commission in hearings, except matters noticed officially or entered by stipulation, will be under oath. Before testimony is presented each person will swear, or affirm, that the testimony he is about to give will be the truth. Attorneys may present oral and written legal argument on behalf of clients as part of the presentation by the party they represent.

g.Rules of evidence. No informality in any proceeding or in the manner of taking testimony will invalidate any order or decision made by the Tax Commission. Unless otherwise provided in these rules the Idaho Rules of Evidence will be generally followed but may be modified at the discretion of the Tax Commission to aid in ascertaining the facts. When objection is made to the admissibility of evidence, the evidence may be received subject to later ruling by the Tax Commission. The Tax Commission, at its discretion either with or without objection may limit or exclude inadmissible, incompetent, cumulative or irrelevant evidence. Parties objecting to the introduction of evidence will briefly state the grounds of objection at the time such evidence is offered.(7-1-24)

h.Recessing hearing for conference. In any proceeding the presiding officer may, at his discretion, call both parties together for a conference prior to the taking of testimony, or may recess the hearing for a conference.

The presiding officer will state on the record the results of the conference.(7-1-24)

i.Transcript. An official electronically recorded transcript of the hearing may be taken at the discretion of the Tax Commission when requested by a party. A petitioner desiring the taking of stenographic notes by a qualified court reporter may notify the Tax Commission in writing and will arrange for the hiring of a reporter and bear the expense of the reporter’s fees. If the reporter’s transcript is deemed by the Tax Commission or presiding officer as the official transcript of the hearing, the petitioner will furnish the Tax Commission a transcript free of charge.(7-1-24)

j.Transcript copies. A request for a copy of a transcript of proceedings at any hearing must be in writing or on the record. Upon completion of the transcript, the Tax Commission will notify the person requesting a copy of the fee for producing the transcript. Upon receipt of the fee, the Tax Commission will send a copy of the transcript.(7-1-24)

IDAPA 35.01.03.408 Re-Examination of Value -- Complaint by Assessor

Section 63-408, Idaho Code Information to be Provided by the Tax Commission. After initial values are established and sent to the respective taxpayers, the Tax Commission will send to each county assessor a statement of the value allocated to Idaho for each centrally assessed taxpayer, together with the previous year’s Idaho value for that taxpayer.(7-1-24)

02.Complaint. On or before July 1, an assessor may file a written complaint requesting the Tax Commission examine the value of operating property. The complaint must be in writing and contain clear and concise questions regarding the valuation and allocation in question. The Tax Commission will send a copy of the complaint promptly to the taxpayer.(7-1-24)

03.Meeting to Examine Valuation and Allocation. Upon receipt of a complaint, the Tax Commission will schedule a meeting between the staff appraiser(s) who performed the valuation and the assessor.

Notice of this meeting is sent to the taxpayer in question. At this meeting, the staff appraiser(s) will answer the assessor’s questions to the best of his knowledge. The taxpayer or representative may participate in this meeting.

IDAPA 35.01.03.409 (Reserved)

IDAPA 35.01.03.411 Private Car Reporting by Railroad Companies

The president or other officer of each railroad company whose railroad tracks run through, in, or into Idaho will, by April 15 of each year file a report with the Tax Commission that includes the following:(7-1-24)

01.Name of Reporting Railroad Company. Report the name of the railroad company making the report.(7-1-24)

02.Name of Private Railcar Fleet. Report the name of each private railcar fleet, defined under Sections 63-201(14) and 63-411, Idaho Code, having traveled on the reporting railroad company’s track.(7-1-24)

03.Private Railcar Fleet's Address. Report the business address of each reported private railcar fleet.

04.Car Type. Report the type of cars by identifying symbol.(7-1-24)

05.Marks. Report the car marks.(7-1-24)

06.Miles Traveled. Report the total number of miles traveled on the reporting railroad’s track, including main line, branches, sidings, spurs, and warehouse or industrial track in Idaho during the year ending December 31 of the preceding year.(7-1-24)

IDAPA 35.01.03.412 (Reserved)

IDAPA 35.01.03.413 Special Provisions for Private Railcar Fleets

a.The Idaho miles are the total number of miles traveled in Idaho by all cars in the private railcar fleet during the calendar year immediately preceding the current tax year.(7-1-24)

b.The Idaho market value is that portion of the system value that reflects the value of that part of the private railcar fleet located in Idaho during all or part of a tax year.(7-1-24)

c.The system miles are the total number of miles, both in and out of Idaho, traveled by all cars in the private railcar fleet during the calendar year immediately preceding the current tax year.(7-1-24)

d.The system value is the value of the entire private railcar fleet regardless of the location of its various components.(7-1-24)

02.Railcar Valuation, Allocation and Apportionment. The Tax Commission will appraise the system value of each private railcar fleet and allocate a portion of the system value to Idaho to obtain the Idaho market value as set forth below. The Idaho market value will be apportioned to the appropriate counties in Idaho pursuant to Section 63-411, Idaho Code.(7-1-24)

03.Allocation. System value is allocated using the “miles to miles” method of allocation.(7-1-24) 04.“Miles to Miles” Method of Allocation. The Tax Commission will divide Idaho miles by system miles and multiply the quotient by five-tenths (0.5). The product of this calculation will be multiplied by the system value to determine Idaho market value.(7-1-24)

IDAPA 35.01.03.414 (Reserved)

IDAPA 35.01.03.415 Apportionment of Railcar Fleet’s Assessed Values Within the State

01.Private Railcar Fleet Apportionment. Railroad track miles will be used for the apportionment of each private railcar fleet’s assessed value when the value within Idaho equals five hundred thousand dollars ($500,000) or more. The Idaho value of each private railcar fleet will be multiplied by a ratio of this private railcar fleet’s mileage for each railroad to this private railcar fleet’s total mileage in Idaho and divided by the in-service main track mileage of that particular railroad, to obtain a rate per mile. This rate per mile is multiplied by the in-service main track mileage in each county and tax code area to calculate the apportioned value. For the purpose of apportioning value by miles traveled, main track includes branch lines, as well as main lines, but does not include industrial spurs, sidings or passing tracks.(7-1-24)

02.Determination of Average Tax Rate -- Private Railcar Fleets Under Five Hundred Thousand Dollars Assessed Value. For private railcar fleets having an assessed value of less than five hundred thousand dollars ($500,000), the average tax rate is computed each year by dividing the current taxes for all private railcar fleets with assessed value of five hundred thousand dollars ($500,000) or more by the current Idaho value of all such fleets. By November 15 of each year, each county treasurer must provide the Tax Commission with the amount of taxes due from all private railcar fleets in the county.(7-1-24)

IDAPA 35.01.03.416 (Reserved)

IDAPA 35.01.03.417 Penalty for Failure to Make Statement

If a private railcar fleet fails or refuses to file the operator’s statement as provided by Section 63-404, Idaho Code, by April 30 of each year, the Tax Commission will add a penalty. The penalty is fifty percent (50%) of the assessed value, determined by the Tax Commission, as provided by Section 63-411, Idaho Code. When an emergency exists, the company may petition the Tax Commission for an extension of time for filing, not to exceed thirty (30) days. For such petition to be valid it must be submitted in writing to the Tax Commission by April 30 of each year.(7-1-24)

IDAPA 35.01.03.418 (Reserved)

IDAPA 35.01.03.509 Abstracts of Value

Sections 63-105A, 63-509, 50-2903, Idaho Code

a.Primary category means the categories established and described by Subsections 130.01. (7-1-24)

b.Secondary Category. Secondary category means the categories established and described by Rules 510, 511, and 512 of these rules.(7-1-24)

c.Secondary Category 81. To list exempt land, improvements, or personal property use category 81.

d.Abstract. A document summarizing net taxable value and market value for assessment purposes (full market value) by secondary category of property. Abstracts are submitted as required in Rule115 of these rules.

02.Additional Information to be Included. The abstract must also report and subtract the value of exemptions required to be reported under Section 63-509, Idaho Code, increment value as defined in Section 50- 2903, Idaho Code, and the value of any exemption provided under Sections 63-602W(4), 63-602GG, 63-602HH, 63- 602II, 63-602NN, 63-4502, 63-606A, and 63-3029B, Idaho Code.(7-1-24)

03.Verification of Abstracts. The abstract of the property rolls prepared by the county auditor will be considered duly verified provided that the auditor signs a document indicating:(7-1-24)

a.That the required summary information is based on the most current available information received from the assessor following the conclusion of the county board of equalization.(7-1-24)

b.That the assessor certifies to the auditor that all changes, corrections, additions, and exemptions entered onto the rolls as a result of county board of equalization action have been duly entered.(7-1-24)

04.Nature of Verification Document. The abstract verification document is certified by the assessor to the auditor and includes the signatures of the county assessor and auditor or duly appointed representatives.

05.Submittal of Corrections to Erroneous Abstracts or Related Documents. When completing the procedures set forth in Section 63-810, Idaho Code, corrections to the net taxable values submitted on the abstracts or related documents are to be submitted with corrected levies.(7-1-24)

06.Cross Reference. See Rules 115, 130, 510, 511, and 512 of these rules and Sections 63-810 and 50-2903, Idaho Code.(7-1-24)

IDAPA 35.01.03.510 Secondary Categories for Land - Listing and Reporting

Section 63-509, Idaho Code Coun ty assessors will use the following secondary categories to list land values on valuation assessment notices under Sections 63-301 and 63-308, Idaho Code, and to report land values to the Tax Commission on the abstracts under Section 63-509, Idaho Code, and Rule 509 of these rules.(7-1-24)

01.Secondary Category 1 - Irrigated Agricultural Land. Irrigated land meeting the definition of “land actively devoted to agriculture” under Section 63-604, Idaho Code, or the requirements for “wildlife habitat” or “conservation agreement” under Section 63-605, Idaho Code, capable of and normally producing harvestable crops.

02.Secondary Category 2 - Irrigated Grazing Land. Land as defined in Secondary Category 1, but primarily used for grazing livestock.(7-1-24)

03.Secondary Category 3 - Non-Irrigated Agricultural Land. Land as defined in Secondary Category 1, but non-irrigated and capable of and normally producing harvestable crops.(7-1-24)

04.Secondary Category 4 - Meadow Land. Land as defined in Secondary Category 1, but is not irrigated, except through subsurface water table control, known as sub-irrigation, and is used for grazing livestock or producing grass hay.(7-1-24)

05.Secondary Category 5 - Dry Grazing Land. Land as defined in Secondary Category 1, but nonirrigated, is not normally capable of supporting crops and is used primarily for grazing livestock.(7-1-24)

06.Secondary Category 6 - Productivity Forestland. Land designated by the owner for assessment, appraisal, and taxation under Section 63-1703(a), Idaho Code. This land must be assessed as forest land under the productivity option. Also included is all land assessed under Section 63-1704, Idaho Code.(7-1-24)

07.Secondary Category 7 - Bare Forestland. All land designated by the owner for assessment, appraisal, and taxation under Section 63-1703(b), Idaho Code. This land must be assessed as bare land with the yield tax option.(7-1-24)

08.Secondary Category 9 - Patented Mineral Land. All land used solely for mines and mining claims. See Section 63-2801, Idaho Code.(7-1-24)

09.Secondary Category 10 - Homesite Land. Rural non-subdivided land being utilized for homesites with secondary categories 1 through 9.(7-1-24)

10.Secondary Category 11 - Recreational Land. Rural land used in conjunction with recreation but not individual homesites.(7-1-24)

11.Secondary Category 12 - Rural Residential Tracts. Rural residential land not in a properly

12.Secondary Category 13 - Rural Commercial Tracts. Rural commercial land not in a properly

13.Secondary Category 14 - Rural Industrial Tracts. Rural industrial land not in a properly

14.Secondary Category 15 - Rural Residential Subdivisions. Rural residential land in a properly

15.Secondary Category 16 - Rural Commercial Subdivisions. Rural commercial land in a properly

16.Secondary Category 17 - Rural Industrial Subdivisions. Rural industrial land in a properly

17.Secondary Category 18 - Other Land.(7-1-24)

18.Secondary Category 19 - Waste. Public Rights-of-Way including roads, ditches, and canals.

Record total acres of land ownership. No assessed value should be assigned.(7-1-24)

19.Secondary Category 20 - Residential Lots or Acreages. Land used for residential purposes and inside city limits. Also use this category for urban homesites when the remaining acreage qualifies as actively devoted to agriculture under Section 63-604, Idaho Code, or has been designated forestland under Chapter 17, Title 63, Idaho Code.(7-1-24)

20.Secondary Category 21 - Commercial Lots or Acreages. Land used for commercial purposes and inside city limits.(7-1-24)

21.Secondary Category 22 - Industrial Lots or Acreages. Land used for industrial purposes and inside city limits.(7-1-24)

22.Secondary Category 25 - Common Area Vacant Land. Common area vacant land not included in individual property assessments.(7-1-24)

23.Cross Reference. See Rules 130, 511 and 512 of these rules.(7-1-24)

IDAPA 35.01.03.511 Secondary Categories for Improvements - Listing and Reporting

Sections 63-301, 63-308, 63-509, Idaho Code County assessors will use the following secondary categories to list improved property values on the valuation assessment notice under Sections 63-301 and 63-308, Idaho Code, and abstracts under Section 63-509, Idaho Code, and Rule 509 of these rules.(7-1-24)

01.Secondary Category 25 - Common Area Land and Improvements. Common area land and improvements on that land not included in individual property assessments.(7-1-24)

02.Secondary Category 26 - Residential Condominiums. Land and improvements included in individual assessments of condominiums or townhouses and used for residential purposes.(7-1-24)

03.Secondary Category 27 - Commercial or Industrial Condominiums. Land and improvements included in individual assessments of condominiums and used for commercial or industrial purposes.(7-1-24)

04.Secondary Category 30 - Improvements. Improvements, other than residential, located on secondary category 20.(7-1-24)

05.Secondary Category 31 - Improvements. Improvements used for residential purposes and located on secondary category 10.(7-1-24)

06.Secondary Category 32 - Improvements. Improvements, other than residential, located on secondary categories 1 through 12 and 15.(7-1-24)

07.Secondary Category 33 - Improvements. Improvements used in conjunction with recreation but not associated with homesites and located on secondary category 11.(7-1-24)

08.Secondary Category 34 - Improvements. Improvements used for residential purposes and located on secondary category 12.(7-1-24)

09.Secondary Category 35 - Improvements. Improvements used for commercial purposes and located on secondary category 13.(7-1-24)

10.Secondary Category 36 - Improvements. Improvements used for industrial purposes and located on secondary category 14.(7-1-24)

11.Secondary Category 37 - Improvements. Improvements used for residential purposes and located on secondary category 15.(7-1-24)

12.Secondary Category 38 - Improvements. Improvements used for commercial purposes and located on secondary category 16.(7-1-24)

13.Secondary Category 39 - Improvements. Improvements used for industrial purposes and located on secondary category 17.(7-1-24)

14.Secondary Category 40 - Improvements. Improvements located on secondary category 18.

15.Secondary Category 41 - Improvements. Improvements used for residential purposes and located on secondary category 20.(7-1-24)

16.Secondary Category 42 - Improvements. Improvements used for commercial purposes and located on secondary category 21.(7-1-24)

17.Secondary Category 43 - Improvements. Improvements used for industrial purposes and located on secondary category 22.(7-1-24)

18.Secondary Category 45 - Utility System. Locally assessed land improvements and other property used as utility systems.(7-1-24)

19.Secondary Category 46 - Manufactured Housing. Structures transportable in one (1) or more sections, built on a permanent chassis and located on land under the same ownership but assessed separately from the land. Include any manufactured home meeting these conditions, on which a statement of intent to declare as real property has been filed but becomes effective the following year.(7-1-24)

20.Secondary Category 47 - Improvements to Manufactured Housing. Additions not typically moved with manufactured housing.(7-1-24)

21.Secondary Category 48 - Manufactured Housing. Manufactured housing permanently affixed to land under the same ownership as the manufactured home or permanently affixed to leased land and on which a statement of intent to declare as real property has been filed and has become effective.(7-1-24)

22.Secondary Category 50 - Residential Improvements on Leased Land. Improvements used for residential purposes and located on leased land, including railroad rights-of-way under separate ownership, exempt land, or any other land under different ownership than the improvements.(7-1-24)

23.Secondary Category 51 - Commercial or Industrial Improvements on Leased Land.

Improvements used for commercial or industrial purposes and located on leased land, including railroad rights-ofway under separate ownership, exempt land, or any other land under different ownership than the improvements.

24.Secondary Category 65 - Manufactured Housing. Manufactured housing not designated real property and located on exempt, rented or leased land under separate ownership. Include any manufactured home located on exempt, rented or leased land on which a statement of intent to declare as real property has been filed but becomes effective the following year.(7-1-24)

25.Secondary Category 69 - Recreational Vehicles. Unlicensed recreational vehicles.(7-1-24)

26.Cross Reference. See Rule 510 and 512 of these rules.(7-1-24)

IDAPA 35.01.03.512 Secondary Categories, Other Than Land or Improvements - Listing and

REPORTING.

Sections 63-509, 63-2802, Idaho Code Coun ty assessors will use the following secondary categories to list property values on assessment notices under Sections 63-301 and 63-308, Idaho Code, and the abstracts under Section 63-509, Idaho Code, and Rule 509 of these

01.Secondary Category 56 - Construction Machinery, Tools, and Equipment.(7-1-24)

02.Secondary Category 59 - Furniture - Commercial Uses.(7-1-24)

03.Secondary Category 63 - Logging Machinery, Tools, and Equipment.(7-1-24)

04.Secondary Category 64 - Mining Machinery, Tools, and Equipment.(7-1-24)

05.Secondary Category 66 - Net Profits of Mines. See Section 63-2802, Idaho Code, and Rule 982 of these rules.(7-1-24)

06.Secondary Category 67 - Operating Property. Property assessed by the Tax Commission.

07.Secondary Category 68 - Other Miscellaneous Machinery, Tools, and Equipment.(7-1-24)

08.Secondary Category 71 - Signs and Signboards.(7-1-24)

09.Secondary Category 72 - Tanks, Cylinders, Vessels.(7-1-24)

10.Secondary Category 81 - Exempt Property. Category 81 is for county use to keep an inventory of exempt property, including land, improvements, and personal property.(7-1-24)

11.Cross Reference. See Rules 510, Rule 511, or 130 of these rules.(7-1-24)

IDAPA 35.01.03.513 (Reserved)

IDAPA 35.01.03.600 Property Exempt from Taxation

Section 63-602, Idaho Code

01.Burden of Proof. The burden of proof of entitlement to the exemption is on the person claiming exemption for the property.(7-1-24)

02.Notice of Decision.(7-1-24)

a.For property subject to local assessment with exemptions requiring annual application, the taxpayer must be notified of the decision of the county commissioners to grant or deny the exemption by May 15 unless a different date is prescribed in the law providing the exemption.(7-1-24)

b.For property subject to assessment by the Tax Commission, application for any exemption is included with the operator’s statement submitted pursuant to Section 404, of these rules.(7-1-24)

03.Confidentiality. Information disclosed as part of an application for an exemption is confidential to the extent provided by Section 74-107, Idaho Code, or elsewhere in law. Information disclosed to the county commissioners as part of the application process for an exemption is deemed submitted to the assessor and entitled to any confidentiality conferred on information disclosed initially to the assessor.(7-1-24)

IDAPA 35.01.03.601 (Reserved)

IDAPA 35.01.03.603 Property Exempt from Taxation – Religious Corporations or Societies

Section 63-602B, Idaho Code Valuing the Taxable Part of Qualifying Property. Under Section 63-602B(2), Idaho Code, a county will determine the value of the part of the property used or leased for business or commercial purposes by considering the particular facts of each case, examining the amount of time, during the calendar year, the property is used for business or commercial purposes, the percentage of the property used for business or commercial purposes, or a combination thereof. The county may require reporting by the religious corporation or society of any use of the property for business or commercial usage in such form, and by such date, as the county establishes.(7-1-24)

02.Comparable Valuation Methodology to Partially Exempt Property Under Section 63-602C, Idaho Code. To value the taxable part of any otherwise qualifying property exempt under Section 63-602B, Idaho Code, each county should use comparable methods to those it uses to value the taxable part of qualifying exempt property under Section 63-602C, Idaho Code.(7-1-24)

IDAPA 35.01.03.604 (Reserved)

IDAPA 35.01.03.605 Property Exempt from Taxation - Property Used for School or

EDUCATIONAL PURPOSES.

Section 63-602E, Idaho Code Eligibility of Leased Property. Leased property used exclusively for non-profit school or educational purposes, including charter school purposes, is eligible for the exemption provided in Section 63-602E, Idaho Code, if it meets the following criteria:(7-1-24)

a.Leased real property must be exclusively used for the educational purposes identified in Subsection 605.01 of this rule. Such leased real property may be part of a multi-use property, but only the portions of the property used for educational purposes are eligible for the exemption.(7-1-24)

b.Leased personal property must be exclusively used for the educational purposes identified in Subsection 605.01 of this rule. Property exclusively used in this manner is:(7-1-24)

i.Used exclusively at a non-profit school or charter school facility; or(7-1-24)

ii.Used in such a way as to effectively eliminate the possibility of use for other than educational purposes.(7-1-24)

02.Application for Exemption for Leased Personal Property. Only the owner of leased personal property can apply for this exemption. Proof of compliance with the requirements of Paragraph 605.01.b. of this rule is required and may be provided by the lessee.(7-1-24)

IDAPA 35.01.03.606 (Reserved)

IDAPA 35.01.03.608 Property Exempt from Taxation - Homestead - Continued Eligibility After

DEATH OF CLAIMANT.

Section 63-602G, Idaho Code Ownership Interest.To continue to qualify in the year following the death of the qualifying claimant, the homestead must continue to be part of the claimant’s estate, without change in record owner. If the ownership interest upon which the exemption had been granted was a life estate, the continuation provided in Section 63-602G(8), Idaho Code, does not apply.(7-1-24)

02.Occupancy. The continuation of this exemption is not affected by occupancy status of the property during the year following the claimant’s death.(7-1-24)

IDAPA 35.01.03.609 Property Exempt from Taxation -- Homestead

Sections 63-602G, 63-701, 63-703, and 63-3077, Idaho Code

01.Homestead Exemption. Granted in 63-602G, Idaho Code.(7-1-24)

02.Partial Ownership. Any partial ownership is ownership for determining qualification for the homestead exemption.The amount of the exemption is equal to the percentage of ownership. If a person has five percent (5%) or greater ownership interest in a limited partnership, limited liability company or a shareholder of a corporation, there is no partial ownership adjustment to the homestead exemption. See homestead calculation examples at https://tax.idaho.gov.(7-1-24)

03.Part Year Ownership. For qualifying taxpayers who claimed the homestead exemption on an eligible property, the homestead that qualified on January 1 of the current tax year will continue to receive the exemption, provided however, the assessor may remove that property's exemption if the taxpayer owns a different homestead and requests that the exemption be transferred to the second homestead.(7-1-24)

04.Determination of Residency. The Tax Commission may release pertinent information from any Idaho income tax return to the county assessor and the county board of equalization for the sole purpose of providing one (1) indicator of eligibility for the homestead exemption. According to Section 63-3077(4), Idaho Code, this information is confidential and is not subject to public disclosure.(7-1-24)

05.Notification of Erroneous Claims. When it is determined that an exemption granted under this Section to a taxpayer who has also received property tax relief under Chapter 7, Idaho Code, should not have been granted, the county assessor will notify the Tax Commission of the determination.(7-1-24)

IDAPA 35.01.03.610 Property Exempt from Taxation -- Residential Improvements -- Special

SITU

ATIONS.

Sections 63-602G, 63-701(2), Idaho Code Scope. This rule addresses issues relating to the homestead exemption as it applies to certain unusual factual situations. It states general principles applicable to unusual cases.The principles established may apply to the resolution of situations not addressed in the rule.(7-1-24)

02.Definitions. The following definitions apply to this rule:(7-1-24)

a.As used in this rule, dual residency couple means a married couple, each of whom has established a different dwelling place as their primary dwelling place as defined in Section 63-602G, Idaho Code, and Subsection 609.03 of these rules.(7-1-24)

b.Multidwelling or Multipurpose Building means a building which is the primary dwelling place of the owner and which has a portion used for any purpose other than the primary dwelling place of the owner. (7-1-24)

c.Related Land means land, not to exceed one (1) acre, that is reasonably necessary for the use of the dwelling as a home.(7-1-24)

03.Dual Residency Couples -- General Principles.(7-1-24)

a.Whether a particular residential improvement is an individual’s primary dwelling place is a question of fact for each individual. Each spouse of a dual residency couple can maintain a separate primary dwelling place for purposes of the homestead exemption. The test to be applied is the general test set out in Subsection 609.03 of these rules.(7-1-24)

b.If a residential improvement is community property, either spouse can file an application for the homestead exemption regarding community property on their own authority. The signature of the other spouse is not required on the application. See Section 32-912, Idaho Code.(7-1-24)

c.Neither spouse is a partial owner of community property. (This principle is an exception to laws generally governing community property interests. It applies only for matters relating to the homestead exemption or the circuit breaker property tax relief program. See Section 63-701(7) Idaho Code.) Thus, there is no authority to reduce the value of the improvement proportionally to reflect one (1) spouse's ownership in community property before determining the amount of the homestead exemption. For purposes of the exemption, a community property interest is treated the same as a full ownership interest.(7-1-24)

d.An owner may apply only once for the homestead exemption. See Section 63-602G(c), Idaho Code.

Thus, an application by one (1) spouse regarding a residential improvement that is community property, precludes the other spouse from making a second application on any other residential improvement whether held by the other spouse as community or separate property except as provided in Subsection 610.07.(7-1-24)

04.Both Residences are Community Property.(7-1-24)

a.Each member of a dual residency couple maintains his or her primary dwelling in a different residential improvement, each of which is owned by the couple as community property. Each applies for the homestead exemption for the residence in which he or she resides.(7-1-24)

b.The first application is valid. Any subsequent application, though filed by the other spouse, is not valid because the couple can not make more than one (1) application. The homestead exemption applies to the full value of the first residential improvement to qualify without any proportional reduction. The other residential improvement does not qualify.(7-1-24)

05.One Residence Is Community Property, the Other Is Separate Property.(7-1-24)

a.Each member of a dual residency couple maintains his or her primary dwelling in a different residential improvement. One (1) is owned by the spouse who resides in it as his or her separate property, the other is owned by the couple as community property. Each applies for the homestead exemption for the residence in which he or she resides.(7-1-24)

b.The first application is valid. Any subsequent application, though filed by the other spouse, is not valid. If the first application relates to the community property, it is an application on behalf of both members of the community. Thus, the other spouse can not file a second application relating to his or her separate property. If the first application relates to the separate property, then the subsequent application relating to the community property is a second application by the spouse owning the separate property and is not valid. The homestead exemption applies to the full value of the first residential improvement to qualify without any proportional reduction. The other residential improvement does not qualify.(7-1-24)

06.Both Residences are Separate Property.(7-1-24)

a.Each member of a dual residency couple maintains their primary dwelling in a different residential improvement, each of which is owned by the spouse residing in it as their separate property. Each applies for the homestead exemption for the residence in which he or she resides.(7-1-24)

b.Both residential improvements qualify for the full homestead exemption. Neither application is a second application by the same owner. Each spouse is the sole owner of the residential improvement, so the proportional reduction provisions for partial ownership do not apply.(7-1-24)

07.Apportionment of Homestead Exemption by Dual Residency Couples. Both spouses of a dual residency couple may elect to equally apportion the homestead exemption between the two (2) residential improvements if each files a written election with the county assessor of the county in which each property is located.

When the election is made each residential improvement is entitled to one-half (1/2) of the exemption applicable to that property alone. The total exempted value of both properties will not exceed the amount of exemption available to the individual residential improvement with the greatest market value if no election were made.(7-1-24)

08.Multiple Ownerships Including Community Interests as Partial Owners. A community property interest in a residential improvement is a partial ownership when combined with the ownership of another individual who is not a member of the marital community. For example, if a deed conveys title to real property to a married couple and to an adult child of theirs, the married couple hold a community property interest in the improvement and the child is a tenant-in-common provided ownership interests are not specified in the deed. The parents collectively hold a one-half (1/2) partial interest and the child holds a one-half (1/2) partial interest in the property. Ownership interests specified in the deed supersede this guidance. Qualification of the property for the homestead exemption is as follows:(7-1-24)

a.If the residential improvement is the primary dwelling of the married couple but not the child, the homestead exemption applies to one-half (1/2) of the value of the improvement.(7-1-24)

b.If the residential improvement is the primary dwelling of the child, but not either spouse, the homestead exemption applies to one-half (1/2) of the value of the improvement.(7-1-24)

c.If the residential improvement is the primary dwelling of the married couple and child, the homestead exemption applies to the full value of the improvement.(7-1-24)

d.If the residential improvement is the primary dwelling of one (1) spouse but of neither the other spouse nor the child, the homestead exemption applies to one-half (1/2) of the value of the improvement unless the residential improvement of the other spouse has previously qualified for the homestead exemption under the dual residency couple rules set out in Subsections 610.02 through 610.07. The one-half (1/2) qualification results from the statutory provision that a community property interest is not considered a partial interest of either spouse. See Paragraph 610.03.c. of this rule.(7-1-24)

e.If the residential improvement is the primary dwelling of one (1) spouse and the child, the homestead exemption applies to the full value of the improvement unless the residential improvement of the other spouse has previously qualified for the homestead exemption under the dual residency couple rules set out in Subsections 610.02 through 610.07.(7-1-24)

09.Determining the Qualifying Portion of a Multidwelling or Multipurpose Building and the Related Land. The portion of a Multidwelling or Multipurpose Building and Related Land used for the primary dwelling place of the owner qualifies for the homestead exemption. When determining the value of the qualifying portion, the assessor will include the Related Land value.(7-1-24)

IDAPA 35.01.03.611 Value of Residential Property in Certain Zoned Areas

Sections 63-602H, Idaho Code Residential Property. Residential property that may qualify for the special valuation exemption provided in Section 63-602H, Idaho Code, may include land and residential improvements. Such property may be owner or non-owner occupied, but must have been in continuous residential use from the time zoning was changed to other than residential. If use of any portion of the property changes to other than residential, the property loses this exemption.(7-1-24)

02.Qualifying Residential Improvements. Qualifying residential improvements are those improvements categorized by the assessor as residential and not consisting of more than four (4) residential units within any qualifying structure.(7-1-24)

IDAPA 35.01.03.612 Property Exempt from Taxation -- Motor Vehicles, Recreational

VEHICLES, AND

VESSELS PROPERLY REGISTERED.

Sections 49-123, 49-401, 49-402A, 49-422, 49 -432, 49-445, 49-446, 63-602J, Idaho Code

a.Motor vehicle means any vehicle as defined in Section 49-123(2), Idaho Code, and any recreational vehicle as defined in Section 49-119(6,) Idaho Code, and any personal property permanently affixed to any of those vehicles.(7-1-24)

b.Exempt Motor Vehicles. Except as provided in Subsection 612.03 of this rule, any motor vehicle, as defined in Subsection 612.01 of this rule, registered for any part of the previous year under Chapter 4, Title 49, Idaho Code, is exempt from property taxation under Sections 49-401 and 63-602J, Idaho Code.(7-1-24)

c.Taxable Vehicles. The following registered or permitted vehicles are taxable and not eligible for the exemption under Sections 49-401 and 63-602J, Idaho Code:(7-1-24)

i.Any vehicle issued a permit in lieu of registration under Section 49-432, Idaho Code; and (7-1-24)

ii.Any manufactured home registered under Section 49-422, Idaho Code.(7-1-24)

02.Exempt Permanently Affixed Personal Property. Except as provided in Subsection 612.05 of this rule, any personal property permanently affixed to any motor vehicle registered as described in Subsection 612.02 of this rule is part of that vehicle. Hence, that permanently affixed personal property is exempt from property taxation under Section 63-602J, Idaho Code.(7-1-24)

03.Taxable Personal Property. The following personal property, not otherwise exempt under Chapter 6, Title 63, Idaho Code, is taxable and not eligible for the exemption under Section 63-602J, Idaho Code.(7-1-24)

a.Any personal property on, but not permanently affixed to, any motor vehicle registered as described in Subsection 612.02 of this rule.(7-1-24)

b.Any personal property on or affixed, permanently or otherwise, to any vehicle issued a permit in lieu of registration under Section 49-432, Idaho Code.(7-1-24)

c.Any personal property on or affixed, permanently or otherwise, to any utility trailer registered under Section 49-402A, Idaho Code.(7-1-24)

04.Recreational Vehicles. The owner of a recreational vehicle, as defined in Section 49-119(6), Idaho Code, must pay a recreational vehicle annual license fee as authorized by Section 49-445, Idaho Code, and as computed in accordance with Rule 020 of these rules in order to be exempt under Section 63-602J, Idaho Code.

a.Recreational vehicles that qualify for licensing and registration and have paid the required registration fee by August 31 each year are eligible for the exemption provided in Section 63-602J, Idaho Code. The owners of recreational vehicles that do not qualify or have not paid the fee must be sent a valuation assessment notice for the recreational vehicle after the August 31 deadline. The assessment of the recreational vehicle is subject to cancellation as provided in Rule 020, provided any applicable registration fee is paid before the fourth Monday of November.(7-1-24)

b.The provisions of Paragraph 612.06.a. of this rule apply to a park model recreational vehicle unless it is determined by the assessor to:(7-1-24)

i.Be permanently attached to a foundation; or(7-1-24)

ii.Have an attached building addition; or(7-1-24)

iii.Have been substantially modified and no longer meet the definition of a park model recreational vehicle. 05.

Taxable Real Property Associated with Vehicles. Associated property, other than the vehicle itself, is taxable unless another exemption applies. Such property may be eligible for the exemption provided in Section 63-602G, Idaho Code, regardless of whether the vehicle is exempt as provided in Section 63-602J, Idaho

IDAPA 35.01.03.613 (Reserved)

IDAPA 35.01.03.615 Property Exempt from Taxation - Certain Intangible Personal Property

Section 63-602L, Idaho Code

a.Contracts and contract rights are enforceable agreements, which establish mutual rights and responsibilities, and rights created under such agreements. Contracts and contract rights do not include tax credits received by low-income housing properties under Section 42 of the Internal Revenue Code.(7-1-24)

b.Copyrights rights granted to the author or originator of literary or artistic productions, by which he or she is invested with the sole and exclusive privilege of making, publishing or selling copies for a specified time.

c.Custom computer programs means those programs defined in Section 63-3616, Idaho Code.

d.Customer lists are proprietary lists containing information about a business enterprise’s customers.

e.Franchises are special privileges.(7-1-24)

f.Goodwill is the expectation of continued public patronage of a business. Goodwill is the ability of a business to generate income in excess of a normal rate due to such things as superior managerial skills, superior market position, favorable community and customer reputation and high employee morale.(7-1-24)

g.Licenses are permissions to do acts, which are not allowed without such permissions.(7-1-24)

h.Method A is the method by which the value of exempt intangible personal property is excluded from the value of operating property by subtracting the market value of exempt intangible personal property from the market value of the operating property at the system level.(7-1-24)

i.Method B is the method by which the value of exempt intangible personal property is excluded from the value of operating property by subtracting the market value of exempt intangible personal property from the market value of the operating property at the state level.(7-1-24)

j.Method C is the method by which the value of exempt intangible personal property is excluded from the value of operating property by using valuation models which value only the non-exempt assets.(7-1-24)

k.Patents are grants from the government conveying and securing the exclusive right to make, use and sell inventions.(7-1-24)

l.Rights-of-way which are possessory only and not accompanied by title are easements by which grantees acquire only the rights to pass over or to access for installation or maintenance, without acquiring exclusive use of the rights-of-way.(7-1-24)

m.Trademarks are marks of authenticity, through which products of particular manufacturers or vendible commodities of particular merchants may be distinguished from those of others.(7-1-24)

n.Trade secrets are formulas, patterns, compilations, programs, devices, methods, techniques or processes, deriving independent economic values from not being generally known by other persons who can obtain economic values from disclosure or use. Trade secrets are the subjects of efforts that are reasonable to maintain secrecy.(7-1-24)

02.Tangible Property Value Not Affected by Intangible Personal Property Value. The values of the exempt intangible personal properties will not affect the values of any tangible properties or the value of the attributes of any tangible properties, regardless of the role of the intangible personal properties in the use of the tangible properties. The exempt values will not include any values attributable to availability of a skilled work force, condition of surrounding property, geographic features, location, rights-of-way, accompanied by title, view, zoning, and attributes or characteristics of real properties.(7-1-24)

03.Operating Property Election, Reporting and Methods. The following apply to operating property for the identification of valuation methods to be used by the Tax Commission, election of Method A, Method B, or Method C by the property owners, reporting by owners and valuation using Method C.(7-1-24)

a.Identification of valuation methods. When the Tax Commission mails the blank Operators’ Statements to the property owners, the Tax Commission will identify proposed changes in valuation methods compared to those relied on in the prior year.(7-1-24)

b.Election default. In the event of default of the taxpayer to make an election, the Tax Commission will use the method proposed in the notice accompanying the Operator’s Statement.(7-1-24)

c.Election of exclusion method. When submitting the Operator’s Statement, the owner has the right to elect the method for exclusion of the values of the exempt intangible personal properties from the operating property value.(7-1-24)

d.Amending Election. An owner may amend the elected method if written notice is received at least seven (7) business days prior to a hearing under Rule 407 of these rules.(7-1-24)

e.Reporting. The Tax Commission will consider the value and supporting data provided by the owners. If no supporting intangibles valuation information is provided by the owners, known exempt intangible personal property will be subtracted or will not be included in the value.(7-1-24)

f.Valuation using Method C. When the owner elects Method C, the Tax Commission will give primary consideration to the cost less depreciation model, without regulatory adjustment, in valuing tangible personal property and non-exempt intangible personal property. Only if this model fails to produce market value of the tangible personal property and nonexempt intangible personal property, will the Tax Commission consider other appropriate valuation models.(7-1-24)

04.Personal Property Reporting for Locally Assessed Property. The exemption for custom software, contracts and contract rights is claimed by including such property on the owner’s personal property declaration form.(7-1-24)

IDAPA 35.01.03.616 (Reserved)

IDAPA 35.01.03.617 Agricultural Land Valuation Definitions and Guidelines

Section 63-205C, Idaho Code

a.The actual use value of agricultural land will be the landlord’s share of net income per acre, capitalized by the annual rate required by Section 63-205C, Idaho Code, plus a component for the local tax rate. The Actual Use Value will be considered market value for assessment purposes.(7-1-24)

b.Economic rent is the average gross income per acre received by a landlord from either a cash rent or crop share rental agreement. Only the rent solely attributable to the agricultural land is included in economic rent.

c.Net Income (Rent) is determined by deducting the landlord’s share of all typical current expenses from economic rent per acre.(7-1-24)

d.Agricultural Area is an identifiable geographical area of similar agricultural land.(7-1-24)

02.Determination of Average Crop Rental Rates.(7-1-24)

a.Determine the average per acre gross income from individual crop cash rents, whole farm cash rents, or crop share typical to the Agricultural Area over the immediate past five (5) growing seasons as reported by local farmers.(7-1-24)

b.If data from local farmers is insufficient, data typical to the Agricultural Area from third party providers, such as the United States Department of Agriculture (USDA), University of Idaho Crop Enterprise Budgets, or similar sources, may be used.(7-1-24)

c.The choice to use cash rent or crop share analysis in determining the taxable value of agricultural land should be predicated on the quantity and quality of data available when developing a supportable value conclusion.(7-1-24)

03.Determination of Farm Credit Services Capitalization Rate.(7-1-24)

a.The Tax Commission will gather the interest rate data from the Spokane office of the Farm Credit Services, average the rate over the immediate past five (5) years and distribute the rate annually to assessors by the second Monday in September.(7-1-24)

b.The local tax rate component is the rate most applicable to the Agricultural Area.(7-1-24)

c.The local tax rate will be added to the Farm Credit Services capitalization rate to develop the overall capitalization rate.(7-1-24)

04.Calculation of Net Income from a Cash Rent Analysis.(7-1-25)

a.Crops Grown. Determine the crops typically grown in the area.(7-1-24)

b.Economic Rent. Determine the average per acre gross income from individual crop rents or whole farm cash rents typical to the Agricultural Area over the immediate past five (5) years.(7-1-24)

c.Landlord’s Expenses. Determine the landlord’s share of all typical expenses paid in the immediately preceding growing season.(7-1-24)

d.Landlord’s Net Income. Subtract the landlord’s share of all typical expenses from the average gross income per acre for the immediately preceding year to determine net income.(7-1-24)

05.Calculation of Net Income from a Crop Share Analysis.(7-1-25)

a.Crops Grown. Determine the crops typically grown in the Agricultural Area.(7-1-24)

b.Average Crop Production. Determine the most recent five (5) year average production for typical crops grown in the Agricultural Area.(7-1-24)

c.Average Commodity Prices. The Tax Commission will publish five (5) year average crop prices by surveying publicly available data from various sources, including the annual crop summary published by the USDA National Agricultural Statistics Service (NASS). Average crop prices determined in this manner by the Tax Com mission should be considered guidelines when determining net income, subject to modification based on local market data.(7-1-24)

d.Gross Income. Multiply average crop production per acre by the average commodity price to determine gross income per acre.(7-1-24)

e.Landlord’s Share of Gross Income. Determine the landlord’s share of gross income per acre from a crop rotation typical to the Agricultural Area.(7-1-24)

f.Landlord’s Expenses. Determine the landlord’s share of all typical expenses paid in the immediately preceding growing season.(7-1-24)

g.Net Income. Subtract the landlord’s share of all typical expenses from the landlord’s share of gross income to determine net income.(7-1-24)

06.Calculation of Grazing and Meadow Land Net Income.(7-1-25)

a.Animal Unit Month (AUM) is the amount of feed the land produces to sustain a one thousand (1,000) pound cow-calf pair, or other animal equivalent for one month.(7-1-25)

b.Determine the number of AUMs by multiplying the number of cow-calf pairs, or animal unit equivalent, grazing a land parcel by the number of months grazed.(7-1-25)

c.Multiply the number AUMs by the five (5) year average of locally reported or third party provided rents per AUM to arrive at the total AUM income.(7-1-25)

d.Divide the total AUM income by the number of acres grazed to calculate the gross income per acre.

e.Subtract landlord’s typical expenses from the immediately preceding year to determine net income per acre.(7-1-24)

07.Cross Reference. See Rules 645 and Rule 131 of these rules.(7-1-24)

IDAPA 35.01.03.618 Computation of the Idaho Irrigation Exemption

Section 63-602N, Idaho Code

01.Production and Delivery Ratio. This ratio is computed by comparing the Idaho investment in production and delivery property to the investment for all Idaho unitary property. The resulting ratio will be known as the production and delivery ratio.(7-1-24)

02.Idaho Production and Delivery Value. This is computed by multiplying the allocated Idaho unitary value, before any exemptions, by the production and delivery ratio.(7-1-24)

03.Irrigation Use Ratio. This ratio is computed by comparing Idaho irrigation revenue to the total Idaho revenue from unitary operations. The resulting ratio will be known as the irrigation use ratio.(7-1-24)

04.Idaho Irrigation Exemption. This is computed by multiplying the Idaho production and delivery value by the irrigation use ratio.(7-1-24)

IDAPA 35.01.03.619 Property Exempt from Taxation -- F

ACILITIES FOR WATER OR AIR POLLUTION

CONTROL.

Section 63-602P, Idaho Code Exempt Property. Only portions of installations, facilities, machinery, or equipment devoted exclusively to elimination, control, or prevention of water or air pollution are exempt.(7-1-24)

02.Calculation of Partial Exemption. The exemption does not include the percentage of the value for any portion of the facility used for the production of marketable by-products. The exempted value is the difference between the market value of the pollution control facilities and the present value of the net income from the sale of by-products. Net income is determined by subtracting the expenses of sale, raw materials required to produce by-products, and transportation to F.O.B. point from gross sales of recovered by-product.(7-1-24)

03.Ineligibility. Landfills, toxic waste dumps, or storage facilities deriving revenue from processing or storing pollution or pollution by-products generated by other persons or businesses are ineligible for this exemption.

04.Filing Procedure. Application for exemption is made annually in the following manner: (7-1-24)

a.The property owner obtains the application form issued by the Tax Commission from the county assessor or the Tax Commission.(7-1-24)

b.The property owner completes the application reporting an itemized listing of all installations, facilities, machines or equipment qualifying for exemption. Each component part of the system must be identified by a brief description, the date of original acquisition, dollar amount of the original cost, and the percentage of the component devoted exclusively to pollution control. The application must be signed by the owner or duly authorized agent. Lack of required information may be grounds for denial.(7-1-24)

c.The completed application must be filed with the county commissioners by April 15 for locally assessed property or with the Tax Commission by April 30 for centrally assessed property.(7-1-24)

05.Inspection. The county or Tax Commission representative may inspect the property or audit the owner’s records to identify components for which the exemption is applied. Those components listed on the application must be identifiable as capital assets of the property.(7-1-24)

06.Exemption Reported on Abstracts. For locally assessed property, exempt value is reported on the property abstracts.(7-1-24)

07.Exemption for Portion of Water Corporation Property. A portion of water corporation property may be exempt from taxation.(7-1-24)

a.On or before April 30, each year, the Tax Commission will receive a notice from the Idaho Public Utilities Commission listing the value of the investment percentage of the total plant of each water company devoted exclusively to the elimination, control, or prevention of water pollution or air pollution.(7-1-24)

b.In estimating the market value of the company for assessment purposes, the Tax Commission will take into consideration the investment as certified by the Public Utilities Commission that such equipment bears to the total invested plant of the company.(7-1-24)

c.The Tax Commission will notify the water company of the estimated market value, gross assessed value, and the amount of exemption allowed under Section 63-602P, Idaho Code, on or before July 15.(7-1-24)

d.Any person or party wishing to contest the percentage of exemption reported to the Tax Commission by the Public Utilities Commission may submit a written request for a public hearing to the Tax Commission by August 1 of the current tax year. The request for a hearing will state the petitioner’s grounds for contesting the percentage reported by the Public Utilities Commission. On or before the second Monday of August the Tax Commission will notify the petitioner of the hearing time and place.(7-1-24)

IDAPA 35.01.03.620 Exemption for Never Occupied Residential Improvements

Section 63-602W, Idaho Code Qualifying Residential Improvements. Residential improvements to any land parcel that have never been occupied for residential purposes may qualify for the exemption pursuant to Section 63-602W, Idaho Code. Qualifying improvements include:(7-1-24)

a.Single family residences, residential townhouses, and residential condominiums; and(7-1-24)

b.Attached or unattached ancillary structures not intended for commercial use and constructed contemporaneously with the improvements identified in Paragraph 620.01.a. Such structures may include sheds, fences, swimming pools, garages, and other similar improvements, subject to the limitations of Subsection 620.02.

02.Non-Qualifying Improvements. Never previously occupied residential improvements that do not qualify for this exemption:(7-1-24)

a.Ancillary structures (see Paragraph 620.01.b.) that are not located on the parcel on which the improvement is located, identified in Subsection 620.01.a. of this rule, pursuant to Section 63-602W, Idaho Code.

b.Remodeling of previously occupied residential improvements.(7-1-24)

c.Improvements included in land value, such as septic tanks, wells, improvements designed to provide utility services or access, and other similar improvements.(7-1-24)

IDAPA 35.01.03.621 (Reserved)

IDAPA 35.01.03.625 Homestead Exemption on Occupancy Tax Roll

Sections 63-317, 63-602G, Idaho Code

01.Eligibility for Multiple Exemptions. Obtaining the exemption in Section 63-602G, Idaho Code, does not preclude a property owner from eligibility for the exemption granted by Section 63-317, Idaho Code. More than one (1) property may be eligible for this exemption if ownership and occupancy of the property occurs at different times during the year and application is made on the owner's primary residence.(7-1-24)

02.Separate Applications. The application for this exemption may substitute for the application required by Section 63-602G, Idaho Code.(7-1-24)

IDAPA 35.01.03.626 Property Exempt from Taxation -- Certain Personal Property

Sections 63-105(A), 63-201, 63-302, 63-308, 63-602Y, 63-602KK, Idaho Code Locally Assessed Property - Application Required.(7-1-24)

a.The filing of one (1) or more of the lists of taxable personal property as required by Section 63-302 or Section 63-602Y, Idaho Code, constitutes application if the total market value of the property to be listed is greater than two hundred fifty thousand dollars ($250,000).(7-1-24)

b.Taxpayers establishing initial eligibility for the exemption provided in Section 63-602KK(2), Idaho Code, may, in lieu of a list, file only an application attesting to ownership of otherwise taxable personal property having a cost of two hundred fifty thousand dollars ($250,000) or less. The application must be filed no later than April 15th of the first year for which the exemption is claimed.(7-1-24)

02.Locally Assessed Property - Taxpayers’ Election of Property Location.(7-1-24)

a.Multiple Locations Within A County. In cases where the taxpayer has personal property located in multiple places within the county, the taxpayer may elect the location of the property to which the exemption will apply by filing the “Idaho Personal Property Exemption Location Application Form” available from the Tax Commission for this purpose. To make the election for property required to otherwise be listed as provided in Section 63-302, Idaho Code, the form must be filed with the county assessor by April 15. For taxpayers with personal property required to be listed as provided in Section 63-602Y, Idaho Code, any application specifying the location of the property to which the exemption provided for in Section 63-602KK(2) will apply, must be filed by the first Monday in November. Should the taxpayer not make an election as to where to apply the exemption, the county will have discretion regarding the property to which the exemption will apply. However, to the extent possible and assuming the assessor is not aware of any changes in eligibility, the exemption first applies to the same property as in the immediate prior year.(7-1-24)

b.Multiple locations in different counties. If the taxpayer owns qualifying personal property in more than one county, the limit is two hundred fifty thousand dollars ($250,000) in market value per county.(7-1-24)

03.Centrally Assessed Property - Application Required.(7-1-24)

a.Except for private railcar fleets, the taxpayer may file a list of personal property located in Idaho with the operator’s statement filed pursuant to Rule 404 of these rules. The filing of such a list will constitute the filing of an application for this exemption. Except as provided in Subsections 626.03.b. and 03.c. of this rule, for such personal property to be considered for the exemption, the operator’s statement must include:(7-1-24)

i.A description of the personal property located in Idaho;(7-1-24)

ii.Cost and depreciated cost of the personal property located in Idaho.(7-1-24)

b.For private railcar fleets subject to assessment by the Tax Commission, the Idaho taxable value is reduced by subtracting the lesser of the Idaho taxable value before the exemption or the product of two hundred fifty thousand dollars ($250,000) times the number of counties in Idaho in which the fleet operates. Provided that the remaining taxable value is five hundred thousand dollars ($500,000) or more, this value is to be apportioned to each taxing district and urban renewal revenue allocation area in accordance with procedures described in Rule 415 of

c.After subtraction of the personal property exemption calculated as provided in Subsection 626.03.b. of this rule, for private railcar fleets subject to assessment by the Tax Commission, and having an Idaho taxable market value of less than five hundred thousand dollars ($500,000), neither the final amount of the exemption nor the taxable value of the fleet is subject to apportionment, and the remaining taxable value is taxed as provided in Rule 415 of these rules.(7-1-24)

d.When operating property companies have locally assessed property, any exemption pursuant to Section 63-602KK(2), Idaho Code must be applied to the locally assessed property first. In this case, the county assessor must notify the Tax Commission of the value of the exemption granted. If such an exemption is entered on the property roll, such notification must be made by the third Monday in July. The Tax Commission will then reduce the amount of the exemption otherwise to be granted to the centrally assessed operating property of the company by the exemption value reported by the assessor. The Tax Commission will notify the company of the reduction in exemption by the fourth Monday in July.(7-1-24)

04.Valuation Assessment Notice. The valuation assessment notice required by Section 63-308, Idaho Code, must show the taxable market value before granting the exemption provided in Section 63-602KK(2), Idaho Code, the exempt market value pursuant to the exemption provided in Section 63-602KK(2), Idaho Code, and the net taxable market value of the personal property. If the net taxable market value is zero (0), no valuation assessment notice is required.(7-1-24)

05.Limitation on Eligibility for the Exemption.(7-1-24)

a.Except for taxpayers claiming and receiving the exemption provided for in Section 63-4502, Idaho Code, taxpayers receiving the personal property exemption provided in Section 63-602KK, Idaho Code, may be eligible for other applicable exemptions.(7-1-24)

b.Personal property exempt in accordance with statutes other than Section 63-602KK, Idaho Code, will not be included in determining when the two hundred fifty thousand dollars ($250,000) limit provided in Section 63-602KK(2) is reached.(7-1-24)

c.Taxpayers with requirements to annually apply for, or list personal property for which other statutorily provided personal property exemptions are sought, must continue to comply with the requirements of these statutes.(7-1-24)

d.Improvements, as defined or described in Sections 63-201 and 63-309, Idaho Code, will not be eligible for the exemption provided in Section 63-602KK. Improvements include mobile and manufactured homes and float homes, regardless of whether such property is considered personal property. Leasehold real properties and other leasehold improvements that are structures or buildings are improvements, and therefore ineligible for the exemption. Structures, such as cell towers, are improvements and are not eligible for the exemption.(7-1-24)

06.Special Rules for the Exemption Provided in Section 63-602KK(1), Idaho Code.(7-1-24)

a.Newly acquired items of personal property, exempt as provided in Section 63-602KK(1), Idaho Code, require no application or inclusion on any list otherwise required pursuant to Sections 63-302 or 63-602Y,

b.The exemption provided in Section 63-602KK(1), Idaho Code, is in addition to the exemption provided in Section 63-602KK(2), Idaho Code.(7-1-24)

07.Limitation on Replacement Money.(7-1-24)

a.There may be changes and reductions as follow:(7-1-24)

i.If a taxing district dissolves, the state will make no payment of the amount previously certified for that district, and when a revenue allocation area terminates and the urban renewal agency is no longer receiving any allocation of property tax revenues, the state will discontinue payment of amounts previously certified for that revenue allocation area, beginning with the next scheduled distribution.(7-1-24)

ii.If taxing districts or revenue allocation areas are consolidated, the amounts of replacement money attributed to each original district or revenue allocation area are summed and, in the future, distributed to the consolidated district.(7-1-24)

iii.For replacement money based on the exemption provided by Section 63-602KK, Idaho Code, in 2013, no urban renewal agency will receive replacement money based on exempt personal property within any revenue allocation area established on or after January 1, 2013, or within any area added to an existing revenue allocation area on or after January 1, 2013.(7-1-24)

iv.For replacement money based on the exemption provided by Section 63-602KK, Idaho Code, in 2022, no urban renewal agency will receive replacement money based on exempt personal property within any revenue allocation area established on or after January 1, 2022, or within any area added to an existing revenue allocation area on or after January 1, 2022.(7-1-24)

v.Any payment made to the Idaho Department of Education, as provided in Subsection 626.08 of this rule is discontinued if the state authorized plant facilities levy is not certified in any year. Certification in subsequent years will not cause any resumption of this payment.(7-1-24)

08.Special Provision For Replacement Money For State Authorized Plant Facilities Levy. The amount of replacement money calculated based on any 2013 or 2022 state authorized plant facilities levy is remitted directly to the Idaho Department of Education.(7-1-24)

09.Special Provision For Exempt Personal Property Within Urban Renewal Revenue Allocation Areas (RAAs). When personal property subject to the exemption in Section 63-602KK(2), Idaho Code, is within an RAA, there is no adjustment to the base value of the RAA unless the remaining taxable market value of the parcel is less than the most current base value of the parcel. In that case, the base value is reduced in accordance with procedures found in Rule 804 of these rules.(7-1-24)

10. No Reporting of Exempt Value. Taxing district values submitted to the Tax Commission as req uired in Section 63-510, Idaho Code, will not include or indicate value exempt pursuant to Section 63-602KK(2),

11.Cross Reference. See Rule 627 of these rules.Taxpayer means the claimant of the exemption pursuant to Section 63-602KK(2), Idaho Code, and must be a person, as that term is defined in Section 63-201, Idaho

IDAPA 35.01.03.627 Property Exempt from Taxation -- Certain Personal Property – Ownership

CLARIFICATION.

Section 63-602KK(2), Idaho Code Idaho Code Section 63-602KK(2) Provides Persons With One Exemption in Each Idaho County in Which They Meet the Ownership Rules.(7-1-24)

a.Person means a trust or estate, a partnership, an association, a limited liability company or a corporation as described in Section 63-3005, Idaho Code.(7-1-24)

b.Although persons are limited to receiving one (1) exemption per county, a person owning more than one (1) business within one (1) county may be entitled to more than one (1) exemption within the county.

02.Common Enterprise and IRC Section 267 Restriction. For purposes of the Idaho Code Section 63-602KK(2) exemption, a person includes two (2) or more individuals or organizations using the property in a common enterprise, and the individuals or organizations are within a relationship described in Section 267 of the Internal Revenue Code. When related parties have separate property in the same county, the exemption can only be claimed by one (1) person when both 627.02.a. and b. are met.(7-1-24)

a.Entities or individuals organized to manage a common scheme of business, are considered to be in a common enterprise.(7-1-24)

b. A common enterprise having a relationship as defined by IRC Section 267 would be considered one (1) person for purposes of this exemption.(7-1-24)

c.Ownership alone does not determine whether entities are one (1) person for purposes of this exemption. Two (2) businesses can have identical ownership, and each receive the exemption, if they do not operate as a common enterprise. In addition, entities in a common enterprise can receive separate exemptions, if their ownership relationship is not identified in Section 267 of the Internal Revenue Code.(7-1-24)

d.For examples and illustrations see https://tax.idaho.gov.(7-1-24)

IDAPA 35.01.03.628 Partial Exemption for Remediated Land

Sections 63-602BB, 39-7203, 39-7204, 39-7207, Idaho Code

a.The application for partial exemption is the form, provided by the Tax Commission, available from the Tax Commission or the county assessor and used to apply for the exemption provided by Section 63-602BB,

b.The certificate of completion is the document issued by the Department of Environmental Quality after the successful completion of a voluntary remediation work plan pursuant to Section 39-7207(1), Idaho Code.

The person receiving the “certificate of completion” will record a copy of the “certificate of completion” with the deed for the “site” on which the remediation took place pursuant to Section 39-7207(2), Idaho Code.(7-1-24)

c.The covenant not to sue is the document issued by the Department of Environmental Quality pursuant to Section 39-7207(4), Idaho Code, upon request from a person receiving the “certificate of completion.”

d.The qualifying owner is the entity identified as the owner on the deed to the property at the time the “certificate of completion” is issued by the Department of Environmental Quality.(7-1-24)

e.The remediated land is the “site” on which the remediation, as defined in Section 39-7203(7), Idaho Code, has been completed.(7-1-24)

f.The remediated land value is the market value for assessment purposes of the land on January 1 of the year following the issuance of the certification of completion (after remediation) less the market value for assessment purposes of the land on January 1 prior to the issuance of the certification of completion (before remediation).(7-1-24)

g.A site is a parcel of real estate for which an application has been submitted under Section 39-7204, Idaho Code. The site is that parcel identified on the application as described in IDAPA 58.01.18, “Idaho Land Remediation Rules,” including the assessor’s parcel numbers(s) and on the voluntary remediation work plan as described in IDAPA 58.01.18, Section 022.(7-1-24)

02.Procedures to Qualify for the Exemption. The “qualifying owner,” or agent thereof, must complete the following procedures for the “site” to qualify for the exemption.(7-1-24)

a.Obtain and complete the application for partial exemption.(7-1-24)

b.Submit the application for partial exemption and copies of the certificate of completion and the covenant not to sue to the county assessor of the county in which the site is located.(7-1-24)

c.File the application for partial exemption with the county assessor on or before March 15 of the year for which the exemption is claimed. The application for partial exemption must be filed only once, during the first year of seven (7) year exemption period.(7-1-24)

IDAPA 35.01.03.629 Property Exempt from Taxation -- Qualified Equipment Utilizing Post

CONSUMER OR POST INDUSTRIAL WASTE.

Section 63-602CC, Idaho Code Application. The exemption will be allowed only if the owner files the form prescribed by the Tax Commission, which reports for the previous calendar year, the actual time each piece of qualified equipment is in use in the production of qualified “product” and non-qualified “product.” The petition must be signed by the owner or duly authorized agent.(7-1-24)

02.Declaration. The declaration will contain an itemized listing of all machinery or equipment. Each component part of the system must be identified by a brief description, the date of purchase and original cost, and the percentage of production time the component is devoted exclusively to the production of “product.” The completed declarations must be filed with the county assessor by March 15th of each year.(7-1-24)

03.Inspection. The county or Tax Commission representative may inspect the property or the owner’s records to identify components petitioned for exemption. Those components listed on the declaration must be identifiable as qualifying personal property assets of the claimant.(7-1-24)

IDAPA 35.01.03.630 Tax Exemption for New Capital Investments

Section 63-4502, Idaho Code Notification of New Capital Investment – Locally Assessed Property.(7-1-24)

a.Prior to receiving the benefit of the tax exemption, the taxpayer will notify the county in which the project site is located that the taxpayer expects to meet the criteria of the New Capital Investments Tax exemption.

Notification is accomplished by submitting a written declaration or notification with the board of county commissioners containing the following information:(7-1-24)

i.The name and address of the taxpayer;(7-1-24)

ii.A description of the new capital investment project;(7-1-24)

iii.The assessor’s parcel number(s) identifying the location of the project site;(7-1-24)

iv.The date that the qualifying period began; (7-1-24)

v. A statement that the taxpayer will make a qualified new capital investment of at least one billion dollars ($1,000,000,000) within the qualifying period.(7-1-24)

b.The notification required hereunder may be submitted by the taxpayer to the board of county commissioners at any time after the qualifying period begins. However, if the notification is submitted after April 15 in a given year, a taxpayer may receive the benefit of the exemption only for tax years following the year in which the notification is filed. Submittal of the notification required hereunder will constitute application for the exemption in compliance with Section 63-602, Idaho Code. Until the taxpayer meets all the requirements for the New Capital Investments Tax exemption, for each year after the first year in which the exemption is granted, the notice must identify the name and address of the taxpayer and the location of the project site, but does not need to provide additional information as required in Paragraph 630.01.a. of this rule.(7-1-24)

02.Notification of New Capital Investment – Centrally Assessed Operating Property. For taxpayers applying for the exemption for operating property subject to assessment by the Tax Commission, the taxpayer will provide notice to the Tax Commission no later than April 30 of the first year the exemption is sought, as part of the operator’s statement required pursuant to Section 63-404, Idaho Code, and Rule 404 of these rules, that the taxpayer expects to meet the criteria of the New Capital Investments Tax exemption.(7-1-24)

a.To be eligible for the exemption, information to be provided on the operator’s statement must include:(7-1-24)

i.A description of the new capital investment project;(7-1-24)

ii.The location of the project site, including county and tax code area(s);(7-1-24)

iii.The date that the qualifying period began; (7-1-24)

iv.A statement that the taxpayer will make a qualified new capital investment of at least one billion dollars ($1,000,000,000) within the qualifying period.(7-1-24)

b.The notification required hereunder may be submitted by the taxpayer to the Tax Commission at any time after the qualifying period begins. However, if the notification is submitted after April 30 in a given year, a taxpayer may receive the benefit of the exemption only for tax years following the year in which the notification is filed. Submittal of the operator’s statement including notification information required hereunder will constitute application for the exemption in compliance with Section 63-602, Idaho Code. Until the taxpayer meets all the requirements for the New Capital Investments Tax exemption, for each year after the first year in which the exemption is granted, the notice must identify the location of the project site, but does not need to provide additional information as required in Paragraph 630.02.a. of this rule.(7-1-24)

03.Notification of New Capital Investment – Taxpayers Applying on Behalf of both Locally and Centrally Assessed Property. A taxpayer may apply for this exemption on behalf of both locally and centrally assessed property located in the same county.(7-1-24)

a.The taxpayer must comply with notice requirements in Subsection 630.01 of this rule for locally assessed property, and for centrally assessed property, the April 30 filing deadline found in Paragraph 630.02.b.

b.Once the taxpayer notifies the Tax Commission as provided in Subsection 630.02 of this rule, the T ax Commission will notify the county commissioners and county assessor by the second Monday in May of the taxpayer’s new capital investment project property to be locally assessed and of the taxpayer’s filing an application for the exemption. By the later of the fourth Monday in July or the conclusion of the county board of equalization, as provided in Section 63-501, Idaho Code, the county clerk must provide to the Tax Commission a statement of the equalized assessed value of the taxpayer’s locally assessed property.(7-1-24)

c.The exemption is granted by the Tax Commission, which will notify the county commissioners and taxpayer by the first Monday in September of the amount of the exemption and the remaining taxable value of the centrally assessed operating property of the taxpayer. This remaining value is to be calculated so that the sum of the centrally and locally assessed property of the taxpayer in the county in which the exemption is being granted does not exceed four hundred million dollars ($400,000,000).(7-1-24)

d.The exemption will apply to the combined total value of the locally and centrally assessed property of the taxpayer within the county in which the project site is located. For continuation of the exemption for both locally and centrally assessed property, Subsections 630.07 and 630.08 of this rule will apply, and, upon satisfaction of the requirements therein, the Tax Commission will notify the county of the continuing exemption.(7-1-24)

04.Property of the Taxpayer. Property of a taxpayer includes all real, personal, or operating property that is owned by or leased to the taxpayer under an agreement that makes the taxpayer responsible for the payment of any property taxes on the property.(7-1-24)

05.New Construction. Property taxable under Section 63-4502, Idaho Code, and that qualifies for listing on the new construction roll as described by Section 63-301(A)3, Idaho Code, may be listed on the new construction roll.(7-1-24)

06.Failure to Make the Qualifying New Capital Investment.(7-1-24)

a.If the taxpayer fails to make the qualifying new capital investment during the qualifying period, the property will lose the exemption granted by this section at the conclusion of the qualifying period.(7-1-24)

b.In the event that, at any time during the qualifying period, the taxpayer receiving the exemption for locally assessed property no longer intends to fulfill the qualified new capital investment requirements, the taxpayer must notify the county commissioners who will notify the county assessor. Upon receipt of such notification, the property previously granted the exemption is taxable for the remainder of the year in which the notification is provided, pursuant to Section 63-602Y, Idaho Code. Failure of the taxpayer to provide such notice does not prevent the county assessor from discovering the taxpayer’s intent through alternate procedures and then notifying the county commissioners that the requirements for the exemption are no longer met. In such an instance, the taxpayer must be notified and may appeal loss of the exemption to the county board of equalization as provided in Section 63-501A,

c.In the event that, at any time during the qualifying period, the taxpayer receiving the exemption for operating property no longer intends to fulfill the qualified new capital investment requirements, the taxpayer must notify the Tax Commission. Upon receipt of such notification, the property previously granted the exemption is taxable. If the notification is received before the Tax Commission has completed the assessment of the operating property for a given year, the exemption will not be granted for that year. If the notification is received after the assessment is completed, the exemption is rescinded beginning the following tax year. If the taxpayer owns centrally and locally assessed property, the Tax Commission will also notify the county commissioners and assessor of the rescinding of the exemption.( 7-1-24)

07.Continuation of Tax Exemption Following the End of the Qualifying Period – Locally Assessed Property.(7-1-24)

a.At any time during the qualifying period, but not later than ninety (90) days after the conclusion of the qualifying period, the taxpayer must provide notice to the county commissioners with sufficient evidence to prove that the required qualifying new capital investment has been made.(7-1-24)

b.Once the taxpayer has successfully met all the requirements pursuant to Section 63-4502, Idaho Code, and provided notice to the county commissioners pursuant to Paragraph 630.07.a. of this rule, the county commissioners will notify the county assessor and taxpayer of the taxpayer’s continuing qualification for the exemption for all years thereafter. The county assessor will retain this notice.(7-1-24)

c.After the year in which the taxpayer has been notified of continuing qualification as provided in Paragraph 630.07.b. of this rule, the taxpayer must continue to notify the county annually to identify the property to be exempted pursuant to Subsection 630.07. Failure to make such notification will not invalidate the exemption; the county assessor must then apply the exemption against the assessed value of the taxpayer’s highest value parcel within the county.(7-1-24)

08.Continuation of Tax Exemption Following the End of the Qualifying Period – Centrally Assessed Operating Property.(7-1-24)

a.At any time during the qualifying period after the requirements for this exemption have been met, but not later than ninety (90) days after the conclusion of the qualifying period, the taxpayer must provide notice to the Tax Commission with sufficient evidence to prove that the required qualifying new capital investment has been made.(7-1-24)

b.Once the taxpayer has successfully met all the requirements pursuant to Section 63-4502, Idaho Code, and provided notice to the Tax Commission pursuant to Paragraph 630.08.a. of this rule, the Tax Commission will notify the taxpayer that the exemption will continue to be granted in perpetuity, and will notify the taxpayer annually prior to the due date for the operator’s statement that they must identify the property qualifying for the exemption in these statements. Failure to provide either notification will not invalidate the exemption; the Tax Commission must then apply the exemption against the assessed value of the taxpayer’s operating property within the county. Centrally assessed taxable property otherwise permitted to be included on the new construction roll is reported to the county assessor for inclusion on the next available new construction roll.(7-1-24)

09.Cross Reference. See Sections 63-802 and 63-301A, Idaho Code, and Rule 802 of these rules.

IDAPA 35.01.03.631 Tax Exemption for Investment in New or Existing Plant and Building

FACILITIES UPON COUNTY COMMISSIONERS’ APPROVAL.

Sections 63-201, 63-602NN, Idaho Code 1.The Investment in Plant. To qualify for this exemption a taxpayer must invest at least the minimum required investment as established by county ordinance in new or existing plant or building facilities excluding the investment in land.(7-1-24)

a.Ordinance to establish the minimum required investment. The county commissioners must pass an ordinance to establish any minimum required investment amount of not less than five hundred thousand dollars ($500,000). Once passed, any minimum so established will remain in place until superseded by another ordinance.

b.Frequency of ordinances to establish minimum required investment. Any ordinance establishing a minimum required investment must remain in effect during the tax year in which it is first in effect. After that tax year, the county commissioners may provide a different required investment amount by passing a new ordinance.

However, any agreement entered into under minimum investment criteria established by prior ordinance is effective for the duration of the exemption time period granted.(7-1-24)

02.The Exemption. The board of county commissioners may agree to exempt all or a portion of the value of non-retail commercial and industrial real property improvements and associated personal property that would otherwise be in excess of the base value for property designated as the defined project for a period of up to five (5) years. Real property improvements owned or leased, and personal property owned, by the taxpayer applying for the exemption may be granted the exemption.(7-1-24)

a.The base value is the taxable value, as defined in Section 63-201(29), Idaho Code, and listed on the property roll, subsequent property roll, or missed property roll, of the property associated with the plant investment for the tax year immediately preceding the first year in which the exemption is to be granted. This includes the taxable value of existing buildings and personal property but not the taxable value of land.(7-1-24)

b.Site improvements, which may add value to land, but are not otherwise categorized as improvements for property tax purposes, are not eligible for this exemption.(7-1-24)

c.Non-retail portions of any mixed-use building or structure otherwise used for commercial or industrial purposes may qualify.(7-1-24)

d.Except as provided in Paragraph 631.02.f. with respect to occupancy tax, the taxpayer must make application by April 15 of the first year for which the exemption is sought. Such application must be made with the county commissioners who have complete discretion to accept or deny the application.(7-1-24)

e. The amount of exemption as provided by the contractual agreement of the county commissioners and the taxpayer may be any amount related to the taxable value added due to the investment above the base value.

f.As provided in Section 63-602Z, Idaho Code, the exemption may apply to property subject to occupancy tax. Granting of the exemption from occupancy tax will not reduce the period during which the property tax exemption provided in Section 63-602NN, Idaho Code, may be granted. The April 15 application deadline is not applicable to exemption from occupancy tax, which may be granted any time during the year.(7-1-24)

IDAPA 35.01.03.632 Property Exempt from Taxation - Oil or Gas Related Wells

Section 63-602OO, Idaho Code Definitions of Oil or Gas Well.(7-1-24)

a.Wells drilled for the production of oil, gas or hydrocarbon condensate may include the well, casing, and other structures permanently affixed inside the well, and the land inside the perimeter of the well.(7-1-24)

b.The well will include the part where the gas producing stratum has been successfully cased off from any oil.(7-1-24)

02.Ineligible Land and Equipment.(7-1-24)

a.Wellheads and gathering lines or any line extending above ground level will not qualify. Equipment used for the extraction, storage, or transportation of oil, gas, or hydrocarbon condensate will not qualify.(7-1-24)

b.Land, other than that used for the well as defined in Subsection 632.01 of these rules, will not qualify. If the presence of the well increases the market value of nearby land, the assessed value of such land will reflect the increase, unless the land qualifies independently for any other property tax exemption.(7-1-24)

IDAPA 35.01.03.633 (Reserved)

IDAPA 35.01.03.645 Land Actively Devoted to Agriculture Defined

Section 63-604, Idaho Code Definitions. The following definitions apply when agricultural land is assessed using the methods found in Section 63-205C, Idaho Code.(7-1-24) a.homesite is that portion of land, contiguous with but not qualifying as land actively devoted to agriculture, and the associated site improvements used for residential and farm homesite purposes.(7-1-24)

b.The associated site improvements include developed access, grading, sanitary facilities, water systems, and utilities.(7-1-24)

c.Nursery stock is defined in Section 22-2302, Idaho Code.(7-1-24)

d.Land used to produce nursery stock means land used by an agricultural enterprise to promote or support the promotion of nursery stock growth or propagation, not land devoted primarily to selling nursery stock or related products. This term also includes land under any container used to grow or propagate nursery stock. This term does not include land used for parking lots or for buildings sites used primarily to sell nursery stock or related items or any areas not primarily used for the nurturing, growth or propagation of nursery stock.(7-1-24)

02.Homesite Assessment. The homesite, residential improvement and other improvements, located on the homesite, will be assessed at market value each year.(7-1-24)

a.Accepted Assessment Procedures. Market value will be determined through procedures, methods, and techniques recommended by nationally recognized appraisal and valuation associations, institutes, and societies and according to guidelines and publications approved by the Tax Commission. Acceptable techniques include those that are either time tested in Idaho, mathematically correlated to market sales, endorsed by assessment organizations, or widely accepted by assessors in Idaho and other states.(7-1-24)

b.The appropriate market is the market most similar to the homesite and improvements located on the homesite. In applying the sales comparison approach, the appraiser should select comparables having actual or potential residential use.(7-1-24)

c.Homesite Independent of Remaining Land. The value and classification of the homesite will be independent of the classification and valuation of the remaining land.(7-1-24)

03.Valuing Land, Excluding the Homesite. The assessor will value land, excluding the homesite, on the following basis:(7-1-24)

a.Land Used for Personal Use or Pleasure. Any land, regardless of size, utilized for the grazing of animals kept primarily for personal use or pleasure and not a portion of a for profit enterprise, will be valued at market value using appraisal procedures identified in Paragraph 645.02.a. of this rule.(7-1-24)

b.Land in a Subdivision. Land in a subdivision with restrictions prohibiting agricultural use will be valued at market value using appraisal procedures identified in Paragraph 645.02.a. of this rule. Land meeting the use qualifications identified in Section 63-604, Idaho Code, and in a subdivision without restrictions prohibiting agricultural use will be valued as land actively devoted to agriculture using the same procedures as used for valuing land actively devoted to agriculture and not located in a subdivision.(7-1-24)

c.Land, Five (5) Contiguous Acres or Less. Land of five (5) contiguous acres or less will be presumed non-agricultural, will be valued at market value using appraisal procedures identified in Paragraph 645.02.a. of this rule. If the owner produces evidence that each contiguous holding of land under the same ownership has been devoted to agricultural use for the last three (3) growing seasons and it agriculturally produced for sale or home consumption fifteen percent (15%) or more of the owner’s or lessee’s annual gross income or it produced gross revenue in the immediate preceding year of one thousand dollars ($1,000) or more, the land actively devoted to agriculture will be appraised using the appraisal methods found in Section 63-205C, Idaho Code. For holdings of five (5) contiguous acres or less gross income is measured by production of crops, nursery stock, grazing, or gross income from sale of livestock. Income will be estimated from crop prices at harvest or nursery stock prices at time of sale.

The use of the land and the income received in the prior year must be certified with the assessor by April 15, each year.

d.Land, More Than Five (5) Contiguous Acres. Land of more than five (5) contiguous acres under one (1) ownership, producing agricultural field crops, nursery stock, or grazing, or in a cropland retirement or rotation program, as part of a for profit enterprise, will qualify to be assessed using the methods found in Section 63-205C Idaho Code. Land not annually meeting any of these requirements fails to qualify as land actively devoted to agriculture and will be valued at market value using appraisal procedures identified in Paragraph 645.02.a. of this

04.Cross Reference. See Rule 617 of these rules.(7-1-24)

IDAPA 35.01.03.646 (Reserved)

IDAPA 35.01.03.700 Definitions for Property Tax Reduction Benefit

Section 63-701, Idaho Code Blind. A person for whom there exists the medically documented opinion that the person is functionally blind as defined in Section 67-5402(2), Idaho Code.(7-1-24)

02.Claimant's Income. All income defined in Section 63-701(5), Idaho Code, that is received by either spouse is included in household income even if one spouse lives in a medical care facility or otherwise lives outside the home except as provided in Rule 709 of these rules. For the purposes of excluding from claimant’s income any return of principal paid by the recipient of an annuity, follow these guidelines.(7-1-24)

a.An annuity means a contract sold by an insurance company to the claimant or claimant’s spouse and designed to provide payments to the holder at specified equally spaced intervals or as a lump sum payment with the following conditions:(7-1-24)

i.The annuity must not be part of any pension plan available to an employee;(7-1-24)

ii.No tax preference is given to the money spent to purchase the annuity;(7-1-24)

iii.The buyer must have purchased the annuity voluntary and not as a condition of employment or participation in an employer provided pension system; and(7-1-24)

iv.Earnings from investments in the annuity must be tax-deferred prior to withdrawal.(7-1-24)

b.Annuities do not include KEOGH plans, Individual Retirement Accounts (IRAs), employer provided pensions, and similar financial instruments. Life insurance premiums will not be treated as the principal of an annuity.(7-1-24)

c.The recipient of the annuity payment(s) must provide proof that the income is the principal paid by the recipient. Such proof includes copies of the holder’s annuity contract and any other documentation clearly indicating the conditions listed in Subparagraphs 700.02.a.i. through 700.02.a.iv. of this Rule are met. IRS form 1099 does not provide sufficient proof.(7-1-24)

03.Fatherless/Motherless Child. Means a child judicially determined to be abandoned, as defined by Sections 16-1602 or 16-2005, Idaho Code, by the child's parent or a child whose parent has had his parental rights terminated pursuant to court order or is deceased.(7-1-24)

04.Proportional Reduction of Value. Is required for partial ownership of otherwise eligible property.

a.There is no reduction of value for community property with no other interests except as provided in Rules 610.07 and 709.04 of these rules. Additionally, there is no reduction in value for the ownership interests of a partner of a limited partnership, a member of a limited liability company or a shareholder of a corporation when that person has no less than a five percent (5%) interest in the entity unless any interests are shared by any entity other than the limited partnership, limited liability company or corporation.(7-1-24)

b.In other cases, benefits are to be calculated by applying the claimant's property tax reduction benefit to the eligible net taxable value of the claimant's share of the property. This value is determined by multiplying the market value of the land and the improvement times the claimant's percent of ownership and subtracting the claimant's homestead exemption.(7-1-24)

c.See examples of proportional reduction of value of property tax reduction claimants at https:// tax.idaho.gov.(7-1-24)

05.Physician. Is defined in Section 54-1803(3), Idaho Code.(7-1-24)

06.Widow/Widower.

A person who has not remarried after the death of their spouse or whose subsequent marriage has been annulled.(7-1-24)

07.Cross Reference. See Chapter 79, Title 67, Idaho Code, for requirements relating to lawful presence in the United States. See IDAPA 35.02.01, “Tax Commission Administration and Enforcement Rules,”

Subsection 702.02.c. for information concerning authorization to release applicant information to a state or federal elected official.(7-1-24)

IDAPA 35.01.03.701 (Reserved)

IDAPA 35.01.03.702 Veteran’s Benefit – Continued Eligibility After Death of Claimant

Sections 63-701, 63-705A, Idaho Code Surviving Spouse. The surviving spouse may not transfer the veteran’s benefit to a different homestead.(7-1-24)

02.Application By Surviving Spouse. The surviving spouse may file an application on behalf of the deceased spouse if the deceased spouse qualified or would have qualified as a claimant on January 1 or before April 15 of the year in which the claim is filed.(7-1-24)

IDAPA 35.01.03.703 (Reserved)

IDAPA 35.01.03.709 Property Tax Reduction Benefit Program – Special Situations

Section 63-701, Idaho Code Scope. This rule addresses issues relating to the property tax reduction benefit program as it applies to certain unusual factual situations. It states general principles applicable to unusual cases and provides some illustrative examples. The rule cannot address every conceivable situation that may arise, but the principles established may apply to the resolution of situations not addressed in the rule. The following examples apply to qualified property tax reduction claimants.(7-1-24)

02.General Principles. Benefits under the property tax reduction program are only available to owners of property that have first qualified for the homestead exemption under Section 63-602G, Idaho Code. See Rule 610 of these rules.(7-1-24)

03.Dual Residency Couples. The definition in Rule 610.02 of these rules applies to this rule. (7-1-24)

a.Case 1 -- Both residences are community property. Property tax reduction is available in regard only to the residential improvement qualifying for the homestead exemption. See Rule 610.04 of these rules.(7-1-24)

b.Case 2 -- One (1) residence is community property, the other is separate property. Property tax reduction is available in regard only to the residential improvement qualifying for the homestead exemption. See Rule 610.05 of these rules.(7-1-24)

c.Case 1 -- Both residences are separate property. Property tax reduction is available in regard to both residential improvements. See Rule 610.06 of these rules.(7-1-24)

d.Household income. In the three (3) cases in Subsection 709.03, the household income upon which qualification is determined is the total of one-half (1/2) the community income plus any separate income of the spouse residing in the residence.(7-1-24)

04.Apportionment of Property Tax Reduction Benefits by Dual Residency Couples. If a dual residency couple makes the election provided in Subsection 610.07 of these rules and the applicable county assessor provided the Tax Commission with a copy of the election required under that rule, each spouse is entitled to one-half (1/2) of the amount of any property tax reduction available to that spouse alone. The household income of the spouse is one-half (1/2) of the community income plus any separate income of the spouse residing in the residence. The total property tax reduction benefit will not exceed the amount of benefit available to the individual spouse with the least household income if no election were made.(7-1-24)

05.Multiple Ownerships Including Community Interests as Partial Owners. Example: A deed conveys title to real property to a married couple and to an adult child of theirs. The married couple holds a community property interest in the improvement and the child is a tenant-in-common, provided ownership interests are not specified in the deed. The parents collectively hold a one-half (1/2) partial interest and the child holds a onehalf (1/2) partial interest in the property. Ownership interests specific in the deed supersede this guidance. For clarification of the calculation of the net taxable value, see Rule 700.04.b. of these rules. Qualification for the property tax reduction is as follows:(7-1-24)

a.If the residential improvement is the primary dwelling of the married couple but not of the child, the claimant qualifies for full benefits applied on one-half (1/2) of the value of the property less the homestead exemption. Household income is the total of the community and separate income of the spouses.(7-1-24)

b.If the residential improvement is the primary dwelling of the qualifying child, but neither spouse, the claimant qualifies for full benefits applied on one-half (1/2) of the value of the property less the homestead exemption. Household income is the total of the child’s income.(7-1-24)

c.If the residential improvement is the primary dwelling of the married couple and a qualifying child, the claimant qualifies for the full benefits applied on full value of the property less the homestead exemption.

Household income is the total of the community and separate income of the spouses and the income of the child.

d.If the residential improvement is the primary dwelling of one (1) spouse but of neither the other spouse nor the child, the claimant qualifies for full benefits applied on one-half (1/2) of the value of the property less the homestead exemption unless the residential improvement of the other spouse has qualified for the homestead exemption. Household income is the total income of both spouses.(7-1-24)

e.If the residential improvement is the primary dwelling of one (1) spouse and a qualifying child, the claimant qualifies for the full benefits applied on the full value of the property less the homestead exemption unless the residential improvement of the other spouse has previously qualified for the homestead exemption. Household income is the total income of both spouses plus the income of the child.(7-1-24)

IDAPA 35.01.03.710 (Reserved)

IDAPA 35.01.03.717 Procedure After Claim Approval

Sections 63-115, 63-317, 63-707, Idaho Code

01.Formatting Requirements. The property tax reduction roll and supplemental occupancy tax reduction roll is formatted as required by Section 63-707, Idaho Code.(7-1-24)

02.Preliminary Property Tax Reduction Roll. Except as provided in Subsections 717.06 and 717.07 of this rule, the roll, certified by the assessor to the county auditor and the Tax Commission by June 1st of each year, is termed the preliminary property tax reduction roll. List the property tax reduction and occupancy tax reduction claimants on the preliminary property tax reduction and occupancy tax reduction rolls in alphabetical order unless the Tax Commission grants permission for claimants to be listed in an alternate order. Submit each original claim form to the Tax Commission in the same order as shown on the preliminary property tax reduction roll.(7-1-24)

03.Final Property Tax Reduction Roll. Except as provided in Subsections 717.06 and 717.08 of this rule, the completed property tax reduction roll, certified by each county clerk to the Tax Commission by the fourth (4th) Monday in October, is termed the final property tax reduction roll. The final property tax reduction roll will list property tax reduction and occupancy tax reduction claimants who applied by September 1, in the same order as shown on the preliminary property tax reduction roll. The Tax Commission will notify the county auditor of any erroneous claims by the second Monday of October pursuant to Section 63-707(6), Idaho Code. The county clerk will make any necessary corrections, adjustments and include erroneous claims disapproved by the Tax Commission on the final property tax reduction roll.(7-1-24)

04.Certification of Electronic Property Tax Reduction Roll by County Assessor. The county assessor will certify the property tax reduction roll to the county auditor and send a copy to the Tax Commission by June 1st of each year. In addition, each county assessor will send a copy of all claims listed on the roll to the Tax Commission. Claims are to be sent in a password protected electronic data file as prescribed by the Tax Commission.

05.Certification of Completed Property Tax Reduction Roll by County Auditor. Except as provided in Section 63-317, Idaho Code, and Subsections 717.06, 717.07, and 717.08 of this rule, no later than the fourth (4th) Monday in October, each county auditor will certify the final property tax reduction roll to the Tax Commission. The roll will contain the preliminary roll information plus information formatted as directed or approved by the Tax Commission.(7-1-24)

06.Occupancy Tax Reduction Claims. List claims submitted to the county assessor January 1 until the fourth Monday in January of the following year as prescribed in Subsections 717.07 and 717.08 of this rule.

07.Preliminary Supplemental Occupancy Tax Reduction Roll. The county assessor will certify this roll to the county auditor and the Tax Commission by the first Monday in March of the following tax year. List claims submitted to the county assessor on the preliminary supplemental occupancy tax reduction roll in the manner outlined in Subsection 717.02 of this rule. Occupancy tax reduction claims are subject to the procedures outlined in Section 63-707, Idaho Code.(7-1-24)

08.Final Supplemental Occupancy Tax Reduction Roll. By the first Monday in April in the following year, the Tax Commission will notify the county auditor of all adjustments or corrections. By the fourth Monday in April of that year, the county auditor will certify the final supplemental occupancy tax reduction roll which will list occupancy claimants in the same order as shown on the preliminary supplemental occupancy tax reduction roll after the county auditor makes corrections. Claims included on the final supplemental occupancy tax reduction roll are to be formatted as outlined in Subsection 717.05 of this rule.(7-1-24)

IDAPA 35.01.03.718 (Reserved)

IDAPA 35.01.03.800 Budget Certification Relating to Operating Property Annexation Value

Section 63-802, Idaho Code “Appropriate County Auditor” Defined. The county auditor of each county within which any taxing district with an annexation is located.(7-1-24)

02.Annexation Values for Operating Properties. Pursuant to Section 63-802, Idaho Code, the Tax Commission will certify the current year’s net taxable values of operating properties within annexations made during the previous calendar year. This certification will list summarized values of said operating properties for each applicable taxing district and is part of the certification required pursuant to Section 63-410, Idaho Code.(7-1-24)

03.County Auditor to Notify Taxing Districts. As soon as possible after receipt of the list pursuant to Subsection 800.02, the appropriate county auditor will notify affected taxing districts.(7-1-24)

IDAPA 35.01.03.801 Limitation on Budget Requests -- Special Plant Facilities Fund Levy

PROVISIONS.

Sections 63-802, 33-804, 33-317A, 33-909, 33-2729, 33-2113, 33-804A, Idaho Code Limits on Plant Facilities Funds. The following limits restrict plant facilities funds for any school, community college, or library district:(7-1-24)

a.The amount of property tax to be budgeted for said fund in any year cannot exceed four tenths of one percent (0.4%) multiplied by the net taxable value of the taxing district as of the year prior to the first year in which a plant facilities fund levy is made;(7-1-24)

b.No district with an existing plant facilities fund may levy for an additional plant facilities fund until the existing plant facilities fund has expired.(7-1-24)

02.Exceptions to Limits. Limitations found in Subsection 01 of this rule do not apply to any stateauthorized plant facilities levy, established under Section 33-909, Idaho Code, or the cooperative service agency (COSA) school plant facility levy established under Section 33-317A, Idaho Code.(7-1-24)

03.Plant Facilities Fund Extensions or Increases. Except for increases related to COSA school plant facility levies, any applicable district may hold an election to increase the amount to be levied pursuant to the requirements of Section 33-804, Idaho Code. For the purpose of such increase, the total levy for plant facilities and bonded indebtedness is computed as follows:(7-1-24)

a.For the first year in which the increased or extended plant facilities fund levy is to be made, sum of the amount to be levied for the plant facilities fund and for any bond fund in existence prior to the new plant facilities fund;(7-1-24)

b.Divide the sum computed in Subsection 801.03.a. by the district’s net taxable value as of the year immediately preceding the year in which the increased or extended plant facilities fund is to be levied.(7-1-24)

04.Cooperative Service Agency (COSA) School Plant Facility Fund Increases. Any school district may hold an election to increase the amount to be levied pursuant to the requirements of Section 33-317A. The total levy for school plant facilities is computed by combining the amount of the proposed COSA plant facility levy with the most recent plant facilities levy.(7-1-24)

05.Maximum Amount of Increased Plant Facilities Fund. Except as provided in Subsection 801.04, when any district increases its plant facilities fund, the maximum amount will not in any year exceed the limit found in Paragraph 801.01.a. applied to the net taxable value of the year immediately preceding the first year the increased fund is to be levied. This limitation will not apply to COSA school plant facility levies, which, in any year, will not exceed four tenths of a percent (0.4%) multiplied by the net taxable value of the immediate prior year.(7-1-24)

06.Special Reporting Requirements for State-Authorized Plant Facilities Levy. When the state Department of Education certifies a state-authorized plant facilities levy to any county under Section 33-909, Idaho Code, the county clerk will forward a copy of such certification to the Tax Commission as an attachment to the L-2 Forms described in Rule 803 of these rules.(7-1-24)

07.Special Reporting for COSA. Any COSA plant facilities levy is reported on a separate line on the L-2 Form defined in Rule 803 of these rules.(7-1-24)

IDAPA 35.01.03.802 Budget Certification Relating to New Construction and Annexation

Sections 63-802, 63-301A, 63-602W, 63-602NN, 63-602E, 50-2903, Idaho Code New Construction Roll Listing. Listing means a summary report of the net taxable value of property listed on the new construction roll. This listing will include the net taxable value of qualifying new construction throughout each taxing district or unit, but will not include otherwise qualifying new construction, the value of which is included in the increment value of any revenue allocation area encompassed by the taxing district or unit. List taxing districts and units in the same order used for the certification of value required pursuant to Section 63-510(1), Idaho Code.(7-1-24)

a.Qualifying new construction which is valued by the Tax Commission is reported to the county assessor for each applicable taxing district by October 1 and listed on the immediate next new construction roll.

b.When a taxing district or the assessor discovers new construction described by Section 63- 301A(3)(g), Idaho Code, the property is included on the immediate next new construction roll at the value that would have been included had the new construction been listed when first eligible.(7-1-24)

c.For each taxing district or unit, the new construction roll is reduced as required in Section 63- 301A(1)(e), Idaho Code, and Paragraph 802.01.e. of this rule. The value deducted can never exceed the original amount added to a new construction roll.(7-1-24)

d.The amount of net taxable value to be deducted under Section 63-301A(1)(e)(i), Idaho Code, is determined by the highest authority to which the assessment is ultimately appealed. Adjustments are not made until there has been a final decision on any appeal.(7-1-24)

e.Provided the addition occurred within the immediate preceding five (5) years, the amount of net taxable value added to any new construction roll for property subsequently granted a provisional exemption under Section 63-1305C, Idaho Code, is deducted from the net taxable value on the immediate next new construction roll prepared following the granting of the provisional exemption.(7-1-24)

02.Manufactured Housing. Installation of new or used manufactured housing occurs when there is net taxable value of such properties that did not previously exist within the county.(7-1-24)

03.Partial New Construction Values. Except as provided in Subsection 802.05 of this rule, the net taxable value attributable directly to new construction is reported on the new construction roll in the tax year it is placed on the property roll. Except as provided in Subsection 802.05 of this rule, any increase in a non-residential parcel’s net taxable value, due to new construction, is computed by subtracting the previous year’s or years’ partial net taxable value(s) from the current net taxable value.(7-1-24)

04.Change in Status.(7-1-24)

a.A previously exempt improvement which becomes taxable is not included on the new construction roll, unless the loss of the exemption occurs during the year in which the improvement was constructed or the improvement has lost the exemption provided in Sections 63-602W(3), 63-602E(3), or 63-602NN, Idaho Code. For any such property, the amount that may be included on the new construction roll is the value of the portion of the property subject to the exemption at the time the exemption was first granted.(7-1-24)

i.If the exemption is lost by the second Monday in July of the year in which the exempt amount was to be subtracted from the new construction roll, then there is no subtraction, nor will the formerly exempt amount be added unless it had been previously subtracted from a new construction roll.(7-1-24)

ii.If the exemption was granted to otherwise qualifying property for which no value had been added to any new construction roll, the value of the property at the time the exemption was first granted may be added to the new construction roll following loss of the exemption.(7-1-24)

b.An urban renewal agency terminating a revenue allocation area must provide the resolution and the ordinance to terminate to the Tax Commission as provided in Section 50-2903(5), Idaho Code. The immediate prior year’s increment value of a terminating revenue allocation area not previously included on a new construction roll, is added to the appropriate year’s new construction roll as provided in Section 63-301A(3)(f) and (i), Idaho Code, and as described in the link found in 802.06.d. Upon the effective date of any de-annexation of a portion of a revenue allocation area, the immediate prior year’s increment value associated with the parcels in the de-annexed area, and not previously included is included in the appropriate year’s new construction roll as described in the link in Paragraph 802.06.d. of this rule, When this information is received after the fourth Monday in July, this increment value is added to the following year’s new construction roll.(7-1-24)

c.If the Tax Commission receives an attestation indicating that an urban renewal plan has been modified in such a way as to reset the base value in a revenue allocation area, as provided in Section 50-2903A, Idaho Code, the previously identified increment value is added to the base and may be added to the new construction roll as described in Section 63-301A(3)(j), Idaho Code. In such a case, at the termination of the revenue allocation area, only the new increment value following the reset of the base value is included on the new construction roll.(7-1-24)

d.See examples of how to add locally assessed property increment value to the new construction roll following de-annexation at https://tax.idaho.gov.(7-1-24)

e.See an example of how to add operating property increment value to the new construction roll following de-annexation at https://tax.idaho.gov.(7-1-24)

f.For taxing districts formed after December 31, 2006, or annexing or being annexed into a revenue allocation area after that date, the amount of increment value added to the new construction roll equals any positive difference between the increment value at the time of formation of the taxing district or annexation by or into the revenue allocation area and the increment value at the time of termination or de-annexation.(7-1-24)

05.Limitation on Annexation and New Construction Roll Value. For any taxing district annexing property in a given year, the new construction roll for the following year excludes value that has been included in the annexation value. When an annexation includes any part of a revenue allocation area, only net taxable value that is part of the current base value of the taxing district is included in the annexation value reported for that taxing district for the year following the year of the annexation.(7-1-24)

IDAPA 35.01.03.803 Budget Certification -- Dollar Certification Form (l-2 Form)

Sections 63-602G(5), 63-802, 63-803, 63-3029B(4), 63-3502 B, 50-2903A, 50-2913, 63-3638(11), and (13), 63- 1305C, 33-802, 39-2812, 27-121, Idaho Code

a.The Dollar Certification Form (L-2 Form) is the form used by taxing districts to certify their budgets to the county. This form is presumed to be a true and correct representation of the budget previously prepared and approved by a taxing district. The budget is presumed adopted according to appropriate statutory procedures.

b.Prior year’s net taxable value is the value used to calculate levies during the immediate prior year.

This value is used for calculating the permanent increase permitted for cities, pursuant to Section 63-802(1)(g), Idaho

c.The annual budget includes any permanent override approved as a result of an election held pursuant to Sections 63-802(1)(g) or 63-802(1)(h), Idaho Code, provided that said amount is certified on the L-2 Form as part of the budget request. If the amount certified does not include the entire amount approved as a result of the election held pursuant to Sections 63-802(1)(g) or 63-802(1)(h), Idaho Code, then the amount not used is eligible to be added to the forgone increase balance for the taxing district.(7-1-24)

d.Property tax funded budget means that portion of any taxing district’s budget certified to the board of county commissioners and approved by the Tax Commission.(7-1-24)

e.Recovered/recaptured property tax and refund list means the report sent by the county auditor to the appropriate taxing district(s) by the first Monday in August and to the Tax Commission with the L-2 Forms, listing the amount of revenue distributed, or refunds charged, to each appropriate taxing district during the twelve (12) month period ending June 30 each year as provided in the following:(7-1-24)

i.Section 63-602G(5), Idaho Code;(7-1-24)

ii.Section 63-3029B(4), Idaho Code;(7-1-24)

iii.Section 63-602KK(7), Idaho Code, for personal property exempted after 2013 for which no replacement money was paid;(7-1-24)

iv.Section 63-3502B(2), Idaho Code, for distributions of gross earnings tax on solar farms;(7-1-24)

v.Section 50-2903A(3), Idaho Code, for distributions of funds derived from revenue allocation areas in excess of the amount necessary to pay indebtedness;(7-1-24)

vi.Section 50-2913(3)(c), Idaho Code, for distributions of funds derived from revenue allocation areas in excess of the amount received during the immediate prior tax year;(7-1-24)

vii.Section 63-1305C(3), Idaho Code, for revoked provisional property tax exemptions; and (7-1-24) viii.Section 63-1305C(6), Idaho Code, for refunds related to provisional property tax exemptions.

f.Taxing district/unit means any governmental entity with authority to levy property taxes as defined in Section 63-201, Idaho Code, and those governmental entities without authority to levy property taxes but on whose behalf such taxes are levied by an authorized entity such as the county.(7-1-24)

g.New taxing district means any taxing district for which no property tax revenue has previously been levied.(7-1-24)

02.Budget Certification. The budget is certified to each board of county commissioners representing each county in which the district is located by submitting the completed and signed L-2 Form. Budget requests for the property tax funded portions of the budget will not exceed the amount published in the notice of budget hearing.

03.Budget Certification Requested Documents. The completed L-2 Form certified to the county is submitted to the Tax Commission for each taxing district with an amount to finance the property tax funded portion of its budget and a copy of the published budget.(7-1-24)

a.Forgone Increase Reservation. For any taxing district reserving additional forgone property taxes as provided in Section 63-802(1)(f), Idaho Code, the required resolution must be submitted to the Tax Commission and the board of county commissioners representing each county in which the district is located by the end of the calendar year during which the most recent L-2 Form was submitted. Consolidating districts may add previously existing forgone amounts by resolution.(7-1-24)

b.Forgone Increase Recovery. Any resolution to recover previously accrued forgone amounts is submitted to the board of county commissioners representing each county in which the district is located along with the L-2 Form. A copy of the resolution is submitted to the Tax Commission with the L-2 Form.(7-1-24)

04.L-2 Form Contents. Each taxing district will use the L-2 Form as prescribed the Tax Commission.

a.Fund Name. Identify the department or fund requesting a budget for the current tax year. (7-1-24)

b.Total Approved Budget. List the dollar amount of the total budget for each department or fund identified. Include all money that a taxing district intends to spend, regardless of whether funds are to be raised from property tax. Funds without support from property tax levies may be combined and noted as non-levying funds.

c.Cash Forward Balance. List any money retained or money brought forward from a prior year intended to fund the approved budget.(7-1-24)

d.Other Revenue not Shown in Column 5. List the revenue included in the total approved budget to be derived from sources other than property tax or money brought forward from a prior year.(7-1-24)

e.Property Tax Replacement. Report the following amounts received for the twelve (12) month period ending June 30 of the current tax year:(7-1-24)

i.The amount of money received under Section 63-3638(11), Idaho Code, as replacement revenue for the agricultural equipment exemption under Section 63-602EE, Idaho Code;(7-1-24)

ii.The amount of money received under Section 63-3638(13), Idaho Code, for the personal property exemption under 63-602KK(2), Idaho Code;(7-1-24)

iii.The amount of money reported on the “Recovered/Recaptured Property Tax and Refund List”;

f.Report the amount of money to be levied from property tax.(7-1-24)

g.Other Information:(7-1-24)

i.The name of the taxing district or unit;(7-1-24)

ii.The voter approved fund tracker showing date of voter approval, starting date, and, except for permanent increases, the effective period for any new or increased fund which is exempt from the budget limitations in Section 63-802, Idaho Code;(7-1-24)

iii.The signature, date signed, printed name, mailing address, email address, and phone number of an authorized representative of the taxing district; and(7-1-24)

iv.For a hospital district which has held a public hearing, a signature certifying such action; (7-1-24)

v.For any taxing district including forgone increases in their budget, an attestation to having held the required public hearing; and(7-1-24)

vi.Judgments to be levied pursuant to Section 63-1305, Idaho Code, including the amount and the court or Board of Tax Appeals order providing for the judgment.(7-1-24)

h.Attached Information. Other information submitted with the L-2 Form:(7-1-24)

i.For newly formed recreation or auditorium districts, a copy of the petition forming the district showing levy restrictions imposed by that petition;(7-1-24)

ii.For any new ballot measures a copy of the ballot and canvass of votes;(7-1-24)

iii.For fire districts levying against utility property or changing exemptions as provided in Section 31- 1425, Idaho Code, a copy of any new agreements with utility companies providing for payment of property taxes by that utility company to that fire district and a copy of any new ordinances changing locally assessed property categories subject to taxation.(7-1-24)

iv.For cities being annexed by fire districts, the amount of property tax spent on fire protection services during the last year the city funded these services;(7-1-24)

v.For any city with city funded library operations and services at the time of consolidation with any library district, a certification reporting the dedicated portion of that city’s property tax funded library budget and separately reporting any portion of its property tax funded general fund budget used to fund library operations or services at the time of the election for consolidation;(7-1-24)

vi.For any library district consolidating with any city that had any portion of its property tax funded budget(s) dedicated to library operations or services at the time of the election for consolidation, a copy of the certification from that city reporting the information provided for in Subparagraph 803.04.h.vi. of this rule; and

vii.For any taxing district including forgone increases in their budget, a copy of the resolution describing the amount and specific purpose of the forgone amount.(7-1-24)

05.Special Provisions for Property Tax Replacement and Refunds Pursuant to Section 63- 1305C(6), Idaho Code. Property tax replacement monies must be reported on the L-2 Form and separately identified on accompanying worksheets. Except as provided in Paragraph 803.05.e. of this rule, for all taxing districts, replacement these monies must be subtracted from or, in the case of refunds, not included in, the “balance to be levied”. The reduced balance will be used to compute levies. The maximum amount permitted pursuant to Section 63-802(1), Idaho Code, will be based on the sum of these property tax replacement monies including recoveries received pursuant to Section 63-1305C(3), Idaho Code, but excluding monies received pursuant to Section 63- 3502B(2), Idaho Code, and the amount actually levied. Each taxing district’s proportionate share of refunds pursuant to Section 63-1305C(6), Idaho Code, as reported in Paragraph 803.01.e. of this rule, must be subtracted from the maximum amount permitted pursuant to Section 63-802(1), Idaho Code.(7-1-24)

a.The Tax Commission will, by the fourth Monday of July, notify each county clerk if the amount of property tax replacemen t money, pursuant to Sections 63-3638(11) and (13), Idaho Code, to be paid to a taxing district changes from the amount paid in the preceding year. By the first Monday of May, the Tax Commission will notify each school district and each county clerk of any changes in the amount of property tax replacement money to be received by that school district pursuant to Sections 63-3638(11) and (13), Idaho Code.(7-1-24)

b.By the first Monday of August of each year, each county clerk will notify each appropriate taxing district or unit of the total amount of property tax replacement monies, and the type of replacement money, as described in Paragraph 803.04.e. of this rule. For charter school districts subject to the provisions of Paragraph 803.05.e. of this rule, the amount to be subtracted is reported.(7-1-24)

c.Except as provided in Paragraph 803.05.d. of this rule, the subtraction required in Subsection 803.05 of this rule may be from any fund(s) subject to the limitations of Section 63-802, Idaho Code. For school districts, these subtractions are first from funds subject to the limitations of Section 63-802, Idaho Code, then from other property tax funded budgets.(7-1-24)

d.For taxing districts receiving distributions of the gross earning tax on solar farms described in Section 63-3502B(2), Idaho Code, the amount of any such distribution received during the twelve (12) months ending June 30 of the current tax year is subtracted from the maximum amount of property tax revenue permitted pursuant to Section 63-802, Idaho Code.(7-1-24)

e.For charter school districts with a levy in 2013 and 2022 for maintenance and operations, as provided in Section 33-802(6), Idaho Code, there is no subtraction for a portion of the property tax replacement money received for property subject to the exemption in Section 63-602KK, Idaho Code. Said portion is the amount calculated by applying the 2013 and 2022 levy rates for the maintenance and operations levy, as authorized in the district’s charter, to the 2013 and 2022 exempt value of personal property used to compute replacement money provided to the school district.(7-1-24)

06.Special Provisions for Library Districts Consolidating with Any City’s Existing Library Operations or Services. For any library district consolidating with any city’s existing library operations or services, the amount of the dedicated property tax funded general fund and library fund budgets certified by the city under Subparagraph 803.04.h.vi., of this rule is added to that library district’s property tax funded budget in effect at the time of the election for consolidation. This total constitutes the district’s property tax funded budget for the most recent year of the three (3) years preceding the current tax year.(7-1-24)

07.Special Provisions for Cities with Existing Library Operations or Services Consolidating with Any Library District and Cities Annexed by Fire Districts. For any city with existing library operations or services at the time of consolidation with any library district, the amount of the dedicated property tax funded library fund budget included in the certification by the city under Subparagraph 803.04.h.vi., of this rule is subtracted from that city’s maximum allowable property tax to be levied after the calculation of the annual budget increases described in Section 63-802, Idaho Code. For cities annexed by fire districts, the city will subtract the amount spent on fire protection services from its maximum allowable property tax to be levied after the calculation of the annual budget increases described in Section 63-802, Idaho Code.(7-1-24)

08.Special Provisions for Interim Abatement Districts. When an interim abatement district transitions into an abatement district under Section 39-2812, Idaho Code, the abatement district will not be considered a new taxing district for the purposes of Section 63-802, Idaho Code. For the abatement district, the annual budget subject to the limitations of Section 63-802, Idaho Code, is the most recent amount of property tax revenue approved for the interim abatement district.(7-1-24)

09.Cross Reference for School Districts with Tu i t i o n F u n d s. For exemption from limitations of Section 63-802, Idaho Code, for school district tuition funds, see Section 33-1408, Idaho Code.(7-1-24)

IDAPA 35.01.03.804 Tax Levy - Certification - Urban Renewal Revenue Allocation Areas

Sections 50-2908, 50-2033, 50-1903, 50-2903A, 50-2905A, 50-2913, 63-803, 63-811, 63-317A, 33-909, 67-1076, 63-802, 63-602Y, Idaho Code

a.Revenue allocation area as referred to in Section 50-2908, Idaho Code, is the area defined in Section 50-2903, Idaho Code, in which base and increment values are to be determined. A new urban renewal plan is required when an urban renewal agency establishes a new revenue allocation area. Revenue allocation areas are not taxing districts.(7-1-24)

b.The current base value does not include value found on the occupancy roll. Current base value includes the previous year’s non-prorated value of current taxable property subject to assessment under Section 63- 602Y, Idaho Code during the year the initial base value was established.(7-1-24)

c.The initial base value for each parcel is the sum of the net taxable value of each category of property in the parcel for the year the revenue allocation area is established. In the case of annexation to a revenue allocation area, initial base value of each annexed parcel shall be the value of that parcel as of January 1 of the year in which the annexation takes place. The initial base value includes any prorated value added for property subject to Section 63-602Y, Idaho Code.(7-1-24)

d.The increment value is the difference between the current net taxable value of each parcel of taxable property in the revenue allocation area and that parcel’s current base value, provided such difference is a positive value. Newly constructed improvements with value listed on the occupancy roll within a newly formed revenue allocation area or within an area newly annexed to an existing revenue allocation area are added as increment value in the year following the year of formation or annexation.(7-1-24)

02.Establishing and Adjusting Base and Increment Values.(7-1-24)

a.Establishing initial base value. If a parcel’s legal description has changed prior to computing initial base value, the value that best reflects the prior year’s net taxable value of the parcel’s current legal description constitutes the initial base year value for such parcel. The initial base value includes the net taxable value, as of the effective date of the ordinance adopting the urban renewal plan. Initial base value does not include value found on the occupancy roll.(7-1-24)

b.Adjustments to base value - general value changes. Adjustments to base values are calculated on a parcel by parcel basis, each parcel being a unit and the total value of the unit being used in the calculation of any adjustment. Base values are to be adjusted downward when the current net taxable value of any parcel in the revenue allocation area is less than the most recent base value. In the case of parcels containing some categories of property which increase in value and some which decrease, the base value for the parcel will only decrease provided the sum of the changes in category values results in a decrease in total parcel value. Any adjustments are by category and may result in increases or decreases to base values for given categories of property for any parcel. Adjustments to base values for any real, personal, or operating property establish new base values from which future adjustments may be made.(7-1-24) c.

Adjustments to base value - splits and combinations. Before other adjustments can be made, the mos t recent base value must be adjusted to reflect changes in each parcel’s legal description. This adjustment is calculated as described in the following subsections:(7-1-24)

i.When a parcel has been split, the most recent base year value is transferred to the new parcels, so that the new total equals the most recent base year value. Proportions used to determine the amount of base value assigned to each of the new parcels are based on the value of the new parcels had they existed in the year preceding the year for which the value of the new parcels is first established;(7-1-24)

ii.When a parcel has been combined with another parcel, the most recent base year values are added together; and(7-1-24)

iii.When a parcel has been split and combined with another parcel in the same year, the value of the split is calculated as set forth in Subparagraph 804.02.c.i. and then the value of the combination calculated as set forth in Subparagraph 804.02.c.ii.(7-1-24)

d.Adjustments to base values when exempt parcels become taxable. Base values are adjusted as

i.When a parcel that was exempt at the time the revenue allocation area was established becomes taxable, the base value is adjusted upwards to reflect the estimated value of the formerly exempt parcel as it existed at the time the revenue allocation area was established;(7-1-24)

ii.Except as provided in Subparagraph 804.02.d.v. of this rule, when a partially exempt parcel within the revenue allocation area becomes fully taxable, the base value of the revenue allocation area is adjusted upwards by the difference between the value that would have been assessed had the parcel been fully taxable in the year the revenue allocation area was established and the net taxable value of the parcel included in the base value of the RAA revenue allocation area;(7-1-24)

iii.For partially exempt properties that do not lose an exemption, but for which the amount of the exemption changes, there is no adjustment to the base value, unless the current taxable value is less than the most recent base value for the property;(7-1-24)

iv.Except as provided in Subparagraph 804.02.d.v. of this rule, when a parcel that is taxable and included in the base value at the time the revenue allocation area is established subsequently becomes exempt, the base value is reduced by the most current value of the parcel included in the base value. If this parcel subsequently becomes taxable, the base value is adjusted upward by the same amount that was originally subtracted; and (7-1-24)

v.Assignment of expiring exemption value to base or increment in revenue allocation areas: (7-1-24)

(1)When a parcel is part of the base value of a new revenue allocation area and subsequently receives the exemption provided in Section 63-602NN, Idaho Code, the exempt value is added to increment value upon loss of the exemption;(7-1-24)

(2)If the parcel were annexed into a revenue allocation area while the plant investment was exempt under Section 63-602NN, Idaho Code, once the exemption expires, the value of the plant investment is added to the base assessment roll; and(7-1-24)

(3)If the plant’s development was initiated or completed before the formation of the revenue allocation area, the value of the taxable improvement is added to the base assessment roll upon loss of the exemption. (7-1-24)

e.Base values are adjusted downward for real, personal, and operating property removed from the revenue allocation area. Property is considered removed under the following conditions:(7-1-24)

i.For real property, the entire improvement is removed from the revenue allocation area without replacement during the year the original improvement was removed. If said improvement is replaced during the year of removal, the reduction in base value is calculated by subtracting the value of the new improvement from the current base value of the original improvement, provided that such reduction is not less than zero (0);(7-1-24)

ii.For personal property, all personal property associated with one (1) parcel is removed from the revenue allocation area or any of the personal property associated with a parcel becomes exempt; and(7-1-24)

iii.For operating property, any of the property under a given ownership is removed from the revenue allocation area.

f.When prope rty is annexed into a revenue allocation area, the base value in the revenue allocation area is adjusted upwards to reflect the value of the annexed property as of January 1 of the year in which the annexation takes effect.(7-1-24)

g.For operating property, the original base value is apportioned to the revenue allocation area on the same basis as is used to apportion operating property to taxing districts and units.(7-1-24)

03.Levy Computation for Taxing Districts Encompassing Revenue Allocation Areas. Levies are computed in one (1) of two (2) ways.(7-1-24)

a.For taxing district or taxing unit funds other than those meeting the criteria listed in Section 50- 2908, Idaho Code, and the levies authorized pursuant to Sections 33-317A and 33-909, Idaho Code, the property tax levy is computed by dividing the dollar amount certified for the property tax portion of the budget of the fund by the net taxable value within the taxing district or unit, including the base value, but excluding the increment value.

b.For taxing district or taxing unit funds meeting the criteria listed in Section 50-2908, Idaho Code, and the levies authorized pursuant to Sections 33-317A and 33-909, Idaho Code, the property tax levy is computed by dividing the dollar amount certified for the property tax portion of the budget of the fund by the net taxable value within the taxing district or unit, including applicable increment value as prescribed in Section 50-2908, Idaho Code.

04.Modification of an Urban Renewal Plan. Except as described in Paragraphs 804.04.a., b., c., or d. of this rule, when an authorized municipality passes an ordinance modifying an urban renewal plan containing a revenue allocation area, for the tax year immediately following the year in which the modification occurs, the base value of property in the revenue allocation area is reset to reflect the current net taxable value of the property.

a.Modification by consolidation of revenue allocation areas. If such modification involves combination or consolidation of two (2) or more revenue allocation areas, the base value is determined by adding together current base values for each of the areas. The current net taxable value of property in an area not previously included in any revenue allocation area is included in the current base value for the consolidated revenue allocation area.(7-1-24)

b.Modification by annexation.(7-1-24)

i.If a revenue allocation area is modified by annexation, the current net taxable value of property in the area annexed is included in the most current base value determined for the revenue allocation area prior to the annexation;(7-1-24)

ii.For bond levies approved prior to December 31, 2007, and included within the boundaries of a revenue allocation area by a change in the boundaries of either the revenue allocation area or the area subject to the bond levy after December 31, 2007, the levy will be computed as described in Paragraph 804.03.b. of this rule;

iii.An annexation permitted pursuant to Section 50-2033, Idaho Code, to a revenue allocation area in existence prior to July 1, 2016, does not change the status of the revenue allocation area regarding inapplicability of the base reset or attestation provisions found in Section 50-2903A, Idaho Code.(7-1-24)

c.Other modifications – attestation requirements. Modification resulting in adjustment of base value to reflect the current net taxable value of the property within the revenue allocation area is not deemed to have occurred when the urban renewal agency attests to having made no modifications to a plan or is not required to attest to plan modifications. Urban renewal agencies required to attest annually to having made or not made plan modifications include:(7-1-24)

i.Urban renewal agencies that establish new revenue allocation areas on or after July 1, 2016, with r egard to any new revenue allocation area; and(7-1-24)

ii.Urban renewal agencies that enact new plans including a revenue allocation area on or after July 1, 2016.(7-1-24)

d.Modifications when there is outstanding indebtedness. When any urban renewal agency attests to having had a plan modification that is not an exception identified in Paragraphs 804.04.a.,r b., or c. of this rule or fails to provide the required attestation, the base value is determined without regard to the modification, provided that the agency certifies to the Tax Commission by June 30 of the tax year that there is outstanding indebtedness as defined in Section 50-2903A(2), Idaho Code. In this case, the allocation of revenue to the urban renewal agency is the amount certified as necessary to pay the indebtedness. Any additional revenue is distributed to each taxing district or unit in the same manner as property taxes. Such revenue is considered property tax revenue for the purpose of the limitations in Section 63-802, Idaho Code. The county clerk will notify the Tax Commission of the amount so distributed for each year beginning July 1 of the prior year and ending June 30 of the current tax year.(7-1-24)

e.For any urban renewal agency subject to the requirements of Section 50-2903A, Idaho Code, except as provided in Paragraph 804.04.d. of this rule, if such agency fails to provide the required attestation by the first Monday of June each year, the Tax Commission will reset the base value or limit allocation of property tax to the urban renewal agency as required in Section 50-2903A, Idaho Code. Provided there is no new plan, an urban renewal agency with a plan including one (1) or more revenue allocation areas in existence prior to July 1, 2016, will only be required to provide this attestation or be subject to base resetting or other limitations for failure to submit this attestation with respect to new revenue allocation areas formed on or after July 1, 2016.(7-1-24)

f.Notice of actions related to base reset or revenue allocation limitations.(7-1-24)

i.The Tax Commission will notify any urban renewal agency, and affected county and city officials, within thirty (30) days of the time the Tax Commission receives an attestation that an urban renewal plan has been modified, or by July 30 in any year in which an attestation is required but none is received, of the Tax Commission’s intent to initiate the process to reset the base value in the following tax year;(7-1-24)

ii. In the case of base reset due to failure to provide the required attestation, the Tax Commission will notify the agency, county and city officials that the base is to be reset in the immediate following year if the Tax Commission has not received the attestation by December 31 of the current tax year;(7-1-24)

iii.In the case of a revenue allocation limitation pursuant to Section 50-2913, Idaho Code, notice is provided to the agency, county, and city officials including the county assessor and county clerk, within thirty (30) days of the due date of the plan or plan update;(7-1-24)

iv.In the case of a revenue allocation limitation due to a plan modification but outstanding indebtedness, notice is provided to the agency and county and city officials, including the county assessor and county clerk, within thirty (30) days of receipt by the Tax Commission of the certification of the amount needed to repay the indebtedness;(7-1-24)

v.Once decisions about base reset or revenue allocation limitations are final, additional notice is sent to the agency and county and city officials, including the county assessor and county clerk, within thirty (30) days of any such final decision. Said notice will include an identification of the year in which the reset or revenue allocation limitation will take effect and the amount of any revenue allocation limitation. (7-1-24)

05.Setting Levies When There is a De-annexation From a Revenue Allocation Area. In any deannexation from a revenue allocation area, levies are set using the base value and, as indicated in Subsection 804.03 of this rule, the appropriate amount of increment value associated with the parcels and operating property remaining in the revenue allocation area after the de-annexation, provided that the de-annexation is in effect no later than September 1 of the current tax year.(7-1-24)

06.Setting Levies When There is a Refinancing of Bonded Indebtedness. Refinancing of bonded indebtedness in existence as of December 31, 2007, does not create new bonded indebtedness for any taxing district wit h respect to the levy setting criteria in Subsection 804.03 of this rule.(7-1-24)

07.Cross Reference. See Rule 802 and 805 of these rules.(7-1-24)

IDAPA 35.01.03.805 Penalty for Failure to Comply with Reporting Requirements

Sections 63-802A, 50-2913, 67-1076, Idaho Code Property Tax Limitation Penalties for Non-compliance. Penalties apply to any taxing district that fails, by April 30 of each year, to provide each appropriate county clerk with written notification of the budget hearing information required pursuant to Section 63-802A, Idaho Code, or that is found out of compliance with the requirements of Section 67-1076, Idaho Code.(7-1-24)

02.County Clerks to Submit Lists. By the fourth Monday of May, each county clerk will submit to the Tax Commission a list of taxing districts out of compliance with the requirements of Section 63-802A, Idaho

03.Additional Penalties. For taxing districts that fail to comply with the requirements of Section 67- 1076, Idaho Code, sales tax money for which the district may be eligible may be withheld. See Rule 995 of these

04.Applicability to Urban Renewal Agencies. Urban renewal agencies failing to annually submit to the Tax Commission plans as required pursuant to Section 50-2913, Idaho Code, are subject to penalties found in that section.(7-1-24)

a.Urban renewal agencies having once submitted such plans, and having made no modification or amendment to such plans, may, by December 1 each year, attest to the currency of the previously submitted plan in lieu of re-submitting that plan.(7-1-24)

b.Providing the Tax Commission with, and updating links to, plans on urban renewal agency websites will constitute compliance with submittal requirements.(7-1-24)

IDAPA 35.01.03.806 Election to Create a New Taxing District -- Clerk’s Mailed Notice

Section 63-802C, Idaho Code.

The spon sors of a proposed new taxing district will submit an estimate of the first year’s property tax budget to the county clerk sixty (60) days prior to the election. When the estimate of the first year’s budget is received, the county clerk will estimate the levy rate based on the most recent actual or estimated net taxable value information available.

If the sponsors fail to provide the budget information, the county clerk will, for taxing districts with funds subject to maximum levy rates, estimate the amount of property taxes to be raised in the proposed district by multiplying the maximum levy rate permitted by law times the most current available estimate of net taxable value. The estimated levy rate is used to compute the estimated taxes per one hundred thousand dollars ($100,000) of net taxable value.

The maximum levy rate means the sum of every maximum statutory levy rate for any fund subject to such limits for the taxing district type.(7-1-24)

IDAPA 35.01.03.807 (Reserved)

IDAPA 35.01.03.808 Additional Documentation by Taxing Districts Not Levying Against All

TAXABLE PROPERTY.

Sections 25-2401, 31-1425, 31-3908A, 42-3115, 42-37 08, 42-4116, 50-3113, 63-510 63-803, Idaho Code

01.Documentation of Categories to be Taxed. If the taxing district elects the property categories to be taxed, documentation of such election must be submitted by the taxing district to each county clerk, who will then submit the documentation to the Tax Commission by the first Monday in August in the first year in which the election takes place and in any year in which the categories elected to be taxed change.(7-1-24)

02.Fire Districts.(7-1-24)

a.Public Utility Agreements. Written agreements with public utilities permitting property taxes to be levied for fire protection of all or a portion of the property of the public utility, pursuant to Section 31-1425(1), Idaho Code, must be submitted. Such agreements need only be submitted once, provided there is no change and such agreements are on file with the county clerk and Tax Commission.(7-1-24)

b.Exemption of all or a portion of unimproved real property and taxable personal property.

Exemption of this property must be documented in the fire district’s formation ballot or other documents creating the fire district or by an ordinance enacted pursuant to Section 31-1425(2), Idaho Code, by the Board of County Commissioners, of each county in which the fire district is located. If the county does not have the necessary documentation, it must be submitted by the fire district by the third Monday in July of the first year in which the fire district intends to levy property taxes on this basis. If such documentation is not available, the fire district levy is against all otherwise taxable locally assessed property.(7-1-24)

03.Flood Control, Levee, Watershed Improvement, Community Infrastructure Districts, and Herd Districts. No special documentation is required.(7-1-24)

04.Ambulance Districts. Exemption of all or a portion of unimproved real property and taxable personal property is documented by an ordinance enacted pursuant to Section 31-3908A, Idaho Code. Absent documentation, the ambulance district levy is against all otherwise taxable property.(7-1-24)

05.Abstracts Showing Value of Property Against Which Levy is to be Applied. For taxing districts not levying property tax against all otherwise taxable property, abstracts must be submitted as required in Rule 115 of

IDAPA 35.01.03.809 (Reserved)

IDAPA 35.01.03.810 Property Tax Relief

Sections 33-911, 57-810, 63-724, 63-902, 63-315, Idaho Code.

Procedures Regarding School District Facilities Fund. The Tax Commission will notify each county clerk no later than the first Monday in September each year of the amounts being distributed annually, pursuant to Section 33-911, Idaho Code, to each school district. Such amounts received by each school district must be reported on the L2 form and subtracted from property tax otherwise to be certified for the following funds:

a.Bonds.(7-1-24)

b.Temporary Supplemental Funds.(7-1-24)

c.School District plant facilities and safe school plant facilities funds.(7-1-25)

02.Additional School District Facilities Funds. If the amount received by the school district from the school district facilities fund exhausts the payments for bonds, temporary supplemental funds, and plant facilities funds, the remaining sums of money are not subtracted from other school district levies as provided in Section 33- 911(2)(d), Idaho Code.(7-1-25)

03.Procedures Regarding Homeowner Property Tax Relief.(7-1-24)

a.The homeowner property tax relief roll certified in August will be the preliminary roll and will include the market value, amount of homestead exemption granted, and net taxable value for the portion of each homestead, as defined in Section 63-701, Idaho Code, granted the homestead exemption.(7-1-24)

i.No property granted the homestead exemption after the second Monday in July each year is to be included in this roll.(7-1-24)

ii.No improvement granted the homestead exemption on property subject to occupancy tax, as provided in Section 63-317, Idaho Code, is to be included in this roll. Land associated with such improvement may be included if it is part of the homestead and if it has a homestead exemption granted by the second Monday in July.

iii.The amount of each homestead property’s net taxable value attributable to increment and base, as defined in Section 50-2903, Idaho Code, will be shown on this roll.(7-1-24)

iv.The amount of taxable value to which tax levies will apply will be shown on this roll. In the case of taxing districts that do not levy property tax against all otherwise taxable property, the net taxable value of the homestead applicable to each taxing district will be shown.(7-1-24)

b.Actual tax relief provided to each homestead and shown on property tax notices will be based on current year’s eligible levies applied to properties on the homeowner property tax relief roll, provided however, the amounts so determined will be reduced proportionally so that the total provided to all eligible homeowners will not exceed the amounts certified to the county by the Tax Commission as provided in Section 63-724, Idaho Code.

c.The provision in Section 63-724, Idaho Code, that requires homeowner property tax relief monies to be distributed in the same manner as property tax includes allocation to urban renewal agencies and all taxing districts as otherwise required.(7-1-24)

d.Tax relief amounts provided pursuant to Section 57-810(2), Idaho Code, will be subtracted prior to determining amounts otherwise certified to the Tax Commission on the property tax reduction roll pursuant to Section 63-707, Idaho Code.(7-1-24)

04.Tax Cancellations and Levy Corrections. Tax cancellations and levy corrections pursuant to Section 63-810, Idaho Code, occurring after certification of tax relief amounts to be paid by the Tax Commission to each county will not alter amounts to be paid by the Tax Commission. Counties receiving tax relief payments that exceed the amount that would have been paid had the tax cancellations or levy corrections been known at the time of the certification of tax relief amounts will remit the excessive amount to the state general fund using the procedure required for homeowner property tax relief overpayments in Section 63-724, Idaho Code.(7-1-24)

IDAPA 35.01.03.811 (Reserved)

IDAPA 35.01.03.902 Property Tax Notice and Receipts - Duty of Tax Collector

Sections 63-704 and 63-902, Idaho Code The tax notice mailed to taxpayers under Section 63-902, Idaho Code, must include taxpayers whose property taxes are paid in full as a result of the property tax reduction approved under Section 63-704, Idaho Code. For these taxpayers, the tax notice will show the amount paid on behalf of the taxpayer and zero (0) taxes owed.(7-1-24)

IDAPA 35.01.03.903 (Reserved)

IDAPA 35.01.03.936 Cancellation of Taxes by Board of County Commissioners

Section 63-1302, Idaho Code A board of county commissioners may cancel taxes for double payment of taxes or the double or erroneous assessment of any property for the same year or other errors. When the canceled taxes have been paid, the board may refund the taxes. The authority to cancel taxes under Section 63-1302, Idaho Code, extends neither to hardship situations pursuant to Section 63-602AA, Idaho Code, nor to cancellation of tax resulting from unequal or excessive valuation by the assessor.(7-1-24)

IDAPA 35.01.03.937 (Reserved)

IDAPA 35.01.03.939 Court or Board of Tax Appeals Ordered Refunds or Credits - Levy

RESTRICTIONS.

Section 63-1305, Idaho Code Fo r each affected taxing district, the decision to certify and levy such amounts as necessary to refund property taxes due to a court or the board of tax appeals orders is permissive. For any taxing district to use this provision, amounts to be levied must be certified within the two (2) years immediately following the order becoming final. Any amount, not certified and levied within that two-year period, is lost. In the second year following the order, the amount remaining is lost for any taxing district for which such amount is less than one hundred dollars ($100).(7-1-24)

IDAPA 35.01.03.940 (Reserved)

IDAPA 35.01.03.960 Definitions

Section 63-1701, Idaho Code Present Use. Present use means that the land contains trees of a marketable species which are being actively managed to produce a forest crop for eventual harvest and which may be accepted by a commercial mill.

02.Silviculture. Silviculture includes the following activities: site preparation, planting, vegetation control, precommercial thinning, commercial thinning, fertilization, mechanical or chemical pest and disease control, pruning, inventorying, cruising, or regeneration surveys, fencing established to protect seedlings, and genetic tree improvement.(7-1-24)

03.Custodial Expenses. Custodial expenses are some of the expenses incurred in the management of forestlands.(7-1-24)

a.Included Expenses. Custodial expenses include the following expenses, except as provided in Paragraph 960.03.b of this rule:(7-1-24)

i.Reforestation expenses are the cost of seeds, seedlings, and planting for the establishment of a forest to the specifications of the Idaho Forest Practices Act (Title 38, Chapter 13, Idaho Code);(7-1-24)

ii.Road maintenance expenses are those costs necessary to prevent major deterioration or maintain the integrity of forest roads including culvert maintenance, public access control, and erosion prevention, but not including the cost of original construction, opening the road for silviculture, driveway maintenance, or recreation access;(7-1-24)

iii.Managing public use expenses are limited to the costs of installing and maintaining gates and signage;(7-1-24)

iv.Forest inventory expenses are the costs of collection and analysis of forest inventory data; (7-1-24)

v.Forest management planning expenses are the costs associated with a geographic information system (GIS) or similar information database and those activities integral to the planning process;(7-1-24)

vi.Facility operations and maintenance expenses are those costs of maintaining and operating facilities necessary for forestland management;(7-1-24)

vii.Environmental analysis and documentation expenses are analysis and documentation costs associated with federal and state environmental requirements;(7-1-24) viii.Appeals and litigation expenses are those costs associated with litigating items associated with federal and state environmental requirements;(7-1-24)

ix.Land survey expenses are those costs associated with surveying forestland;(7-1-24)

x.Forest fire suppression expenses are the portion of those costs associated with the suppression of wildfires on forestlands borne by the forestland owner, that exceed the annual fire protection fee under Section 38- 111, Idaho Code;(7-1-24)

xi.Other management expenses are unspecified costs agreed to by the committee on forestland taxation methodologies (CFTM) and determined to be annualized custodial expenses by the forest management cost study conducted pursuant to Section 63-1705, Idaho Code.(7-1-24)

b.Excluded Expenses. Custodial expenses exclude the following:(7-1-24)

i.Fertilization;(7-1-24)

ii.Precommercial thinning;(7-1-24)

iii.Tree improvement;(7-1-24)

iv.Genetic improvement;(7-1-24)

v.Site preparation;(7-1-24)

vi.Harvesting;(7-1-24)

vii.Road building;(7-1-24) viii.Timber harvest layout and silvicultural layout;(7-1-24)

ix.Slash management;(7-1-24)

x.Brush control; and(7-1-24)

xi.Litigation pertaining to Subparagraphs 960.03.b.i. through 960.03.b.xi., of this rule.(7-1-24)

04.Forestland Management Plan. Forestland management plan means a written management plan reviewed by a professional consulting forester, Idaho Department of Lands private forestry specialist, professional industry forester, or federal government forester, to include eventual harvest of the forest crop. Professional forester is defined as an individual holding at least a Bachelor of Science degree in forestry from an accredited four (4) year institution. The forestland management plan will include as a minimum:(7-1-24)

a.Date of the plan preparation;(7-1-24)

b.Name, address, and phone number of the land owner, and person preparing and/or reviewing the plan;(7-1-24)

c.The legal description of the property;(7-1-24)

d.A map of the property of not less than 1:24,000 scale;(7-1-24)

e.A general description of the forest stand(s) including species and age classes;(7-1-24)

f.A general description of the potential insect, disease, and fire hazards that may be present and the management systems which will be used to control them;(7-1-24)

g.The forest management plans of the landowner over the next twenty (20) years.(7-1-24)

05.Bare Forestland. Bare forestland will qualify as forestland only if, within five (5) years after harvest or initial assessment, they are planted or regenerated naturally to minimum stocking levels as specified by the Idaho Forest Practices Act. (Title 38, Chapter 13, Idaho Code).(7-1-24)

06.Joint Ownership. Joint ownership as used in Subsections 963.01 and 966.01 of these rules includes ownership of a single parcel of forestland by two (2) or more legal entities irrespective of their proportionate ownership interests in the parcel, but will not include the community property interests of a spouse.(7-1-24)

IDAPA 35.01.03.961 Homesite Assessment and Forestlands of Less Than Five Acres and

CONTIGUOUS PARCELS.

Sections 63-1702, 63-1703, Idaho Code Definitions. The following definitions apply to the valuation of residential parcels that are contiguous to lands classified as forestlands.(7-1-24)

a.Homesite. The “homesite” is that portion of land, contiguous with but not qualifying as forestlands, and the associated site improvements used for residential purposes.(7-1-24)

b.Associated Site Improvements. The “associated site improvements” include developed access, grading, sanitary facilities, water systems, and utilities.(7-1-24)

02.Homesite Assessment. Each homesite and residential and other improvements, located on the homesite, will be assessed at market value each year.(7-1-24)

a.Accepted Assessment Procedures. Market value will be determined through procedures, methods, and techniques recommended by nationally recognized appraisal and valuation associations, institutes, and societies and according to guidelines and publications approved by the Tax Commission. Acceptable techniques include those that are either time tested in Idaho, mathematically correlated to market sales, endorsed by assessment organizations, or widely accepted by assessors in Idaho and other states.(7-1-24)

b.Appropriate Market and Comparable Selection. The appropriate market is the market most similar to the homesite and improvements located on the homesite. In applying the sales comparison approach, the appraiser should select comparables having actual or potential residential use.(7-1-24)

c.The value and classification of the homesite will be independent of the classification and valuation of the remaining land.(7-1-24)

03.Forestlands of Less Than Five Acres and Contiguous Parcels. A parcel of forestland that is less than five (5) acres is not eligible for valuation and taxation as forestland unless that parcel is currently granted forestland status, or unless a parcel is created solely by a tax code area boundary or governmental Public Land Survey System boundary of an original parcel with a single property description comprising at least five (5) acres of forestland. The five (5) acre minimum requirement must exclude any homesite. If a landowner owns a fifteen (15) acre parcel which contains four (4) acres of forestland, nine (9) acres of irrigated row crop, and two (2) acres of homesite. The four (4) acres of forestland is not eligible for valuation and taxation as forestland.(7-1-24)

IDAPA 35.01.03.962 Taxation of Designated Forestlands

Section 63-1705, Idaho Code Forestland Valuation Process. The process used to determine the forestland value under the productivity option will be as specified in the User’s Guide referenced in Section 63-1701, Idaho Code.(7-1-24)

02.Forest Valuation Zones. The state will be divided into four (4) forest valuation zones:(7-1-24)

a.ZONE 1 - Boundary, Bonner, Kootenai counties.(7-1-24)

b.ZONE 2 - Benewah, Shoshone, Latah, Clearwater, Nez Perce, Lewis, Idaho counties.(7-1-24)

c.ZONE 3 - Adams, Valley, Washington, Payette, Gem, Boise, Canyon, Ada, Elmore, Camas, Blaine, Gooding, Lincoln, Jerome, Minidoka counties.(7-1-24)

d.ZONE 4 - The remaining nineteen (19) counties.(7-1-24)

03.Classification of Forestlands. In all forest valuation zones, there will be three (3) separate productivity classes of forestland: poor, medium, and good. These broad classes are related in the following manner by definition to the “Meyer Tables” published in “Yield of Even-Aged Stands of Ponderosa Pine” and “Haig Tables” published in “Second-Growth Yield, Stand, and Volume Table for the Western White Pine Type” as both documents are referenced in Rule 003 of these rules. These classes apply to forestland which may or may not be stocked with commercial or young growth timber.(7-1-24)

a.Poor productivity class is defined as forestland having a mean annual increment, MAI, of one hundred twenty-five (125) board feet per acre per year, based on a seventy-three (73) year rotation. This productivity class includes western white pine site index 35-45 and Ponderosa pine site index 45-80. One hundred twenty-five (125) board feet per acre MAI will be used in the valuation process.(7-1-24)

b.Medium productivity class is defined as forestland having a mean annual increment, MAI, of two hundred twenty-five (225) board feet per acre per year, based on an sixty-eight (68) year rotation. This productivity class includes western white pine site index 46-60 and Ponderosa pine site index 81-110. Two hundred twenty-five (225) board feet per acre MAI will be used in the valuation process.(7-1-24)

c.Good productivity class is defined as forestland having a mean annual increment, MAI, of three hundred fifty (350) board feet per acre per year, based on an sixty-three (63) year rotation. This productivity class includes western white pine site index 61 and above and Ponderosa pine site index 111 and above. Three hundred fifty (350) board feet per acre MAI will be used in the valuation process.(7-1-24)

d.For forest valuation zones 1 and 2, forestland will be stratified into areas of similar productive potential using the habitat typing methodology described in “Forest Habitat Types of Northern Idaho: A Second Approximation,” referenced in Rule 003 of these rules. Within these stratified areas, site index trees will be selected and measured that will identify the site index to be used to place the land in one (1) of the three (3) productivity classes listed above.(7-1-24)

e.For forest valuation zones 3 and 4, the criteria for stratification will be generally the same as that used in zones 1 and 2 based on the habitat typing methodology described in “Forest Habitat Types of Central Idaho,” as referenced in Rule 003 of these rules, with the following adjustments made in growth rates for lower moisture levels;(7-1-24)

i.For poor productivity class, one hundred twenty-five (125) board feet per acre MAI will be used in the valuation process;(7-1-24)

ii.For medium productivity class, two hundred thirteen (213) board feet per acre MAI will be used in the valuation process; and(7-1-24)

iii.For good productivity class, three hundred twenty (320) board feet per acre MAI will be used in the valuation process.(7-1-24)

04.Deficient Areas. Lakes, solid rock bluffs, talus slopes, and continuously flooded swampy areas, larger than five contiguous acres in size which can be identified through remote sensing will be valued at forty percent (40%) of the poor bare land value as defined in Section 63-1706, Idaho Code. These areas are defined as being incapable of growing trees.(7-1-24)

05.Reclassification of Forestlands. Except as provided in Subsection 962.06 of this rule, no parcel’s productivity classification can be changed from the classification as of January 1, 2016, until requirements for landowner notification, inspector qualifications, and document retention have been met.(7-1-24)

a.Landowner notification. Notice of intent to change classification must be provided in writing to the landowner of record or their designee within two (2) weeks of any determination by the county assessor of intent to change classification. Such notice must be provided no later than the first Monday in November for the change to be in effect during the following year. Notice may be delivered in person or by U.S. mail, or, if agreed to by the assessor and the landowner, by electronic mail. Notice of intent to change classification includes:(7-1-24)

i.A statement of intent to change the classification;(7-1-24)

ii.A statement of the present classification and the intended new classification;(7-1-24)

iii.A statement that the intent notice is not an assessment notice and that the assessment notice will be sent by the first Monday in June in the following year;(7-1-24)

iv.A statement that both the assessed value stated on the assessment notice and the classification may be appealed to the county board of equalization as provided in Section 63-501A, Idaho Code; and(7-1-24)

v.Contact information indicating assessor’s office staff who may be contacted and how to do so.

b.Inspector qualifications. The inspector is the person assigned by the county assessor to review property characteristics and complete a timberland classificati on form provided by the Tax Commission. The inspector must be proficient in each of the following:(7-1-24)

i.Navigating forest locations;(7-1-24)

ii.Skilled mapping techniques;(7-1-24)

iii.Establishment of plot locations;(7-1-24)

iv.Plant and tree identification; and(7-1-24)

v.Site tree identification and measurements.(7-1-24)

c.Inspector proficiency. Inspector proficiency must be established by a minimum of twelve (12) months of experience doing fieldwork, including reviewing the characteristics of timberland and:(7-1-24)

i.Passing a Tax Commission sponsored class on timberland appraisal and inspection; or(7-1-24)

ii.Passing equivalent courses from an accredited college or university; or(7-1-24)

iii.Obtaining a degree in forestry or a related field from an accredited institution.(7-1-24)

d.Documentation and retention. Documentation related to timberland productivity classification will be retained for no less than ten (10) years following classification determination. Documentation will include, but is not limited to:(7-1-24)

i.Timberland characteristics, on a form provided by the Tax Commission, with sufficient detail to verify the classification, including the calculation of productivity class as set forth in Subsection 962.03 of this rule;

ii.The location of any field plots and any site trees using map or Global Positioning System (GPS) coordinates;(7-1-24)

iii.A map illustrating property boundaries, habitat type based stratifications as provided in Subsection 962.03 of these rules, and plot locations used in the determination of productivity class; and(7-1-24)

iv.Any imagery used to assess the parcel prior to field review.(7-1-24)

06.Alternate Method to Establish Productivity Classification. Provided the county assessor and forestland owner agree and the data is deemed by the county to be acceptable and accurate, the data used to establish any parcel’s productivity classification may be provided by the forestland owner. In this case, inspector qualifications and proficiency provisions of this rule will not apply.(7-1-24)

a.Data to be considered confidential. When productivity data is provided to the county by the forestland owner, it will be deemed confidential financial information and not subject to public disclosure, as provided in Rule 004 of these rules.(7-1-24)

b.Inspector certification not required. When the alternate method described in this section is to be used, the county will not be required to have a certified inspector to review property characteristics.(7-1-24)

c.Acceptable classification. To be considered acceptable, the classification of the timberland so established must result in market value for assessment purposes as defined in Section 63-1705(3), Idaho Code.

IDAPA 35.01.03.963 Certain Forestlands to Be Designated for Taxation by Owner --

LIMITATIONS.

Section 63-1705, 63-1706, Idaho Code Designation of Forest Parcels. A forest landowner may choose to have the total acreage of forestland parcels owned within the state designated under the provisions of either Section 63-1705 or 63-1706, Idaho Code. The forest landowner cannot have parcels in both designations. If the new owner owns no forestland in the state designated under Section 63-1705 or 63-1706, Idaho Code, he may choose the option of forest taxation he desires. Designation will be made on or before December 31st, of the year preceding assessment and will be effective for the following year. Where forest property is held in joint ownership, all co-owners must mutually agree on a property designation under Section 63-1703(a) and (b), Idaho Code. Each co-owner must make a timely designation.

Where co-owners are unable to agree on a mutual designation or fail to make a designation, the forestland will be subject to appraisal and assessment as provided in Section 63-1702, Idaho Code.(7-1-24)

02.Change in Use. Failure to notify the assessor of the change in use when lands have been designated will cause forfeiture of the designation as to the changed acres, and the property will be appraised, assessed and taxed, as provided in Section 63-1702, Idaho Code, from the date of latest designation or renewal.(7-1-24)

03.Certain Lands With No Deferred Taxes. There are no deferred taxes on lands designated under Section 63-1705, Idaho Code.(7-1-24)

IDAPA 35.01.03.964 Yield Tax on Applicable Forest Products

01.Calculation.

The calculation described in Section 63-1705 (4), Idaho Code, will be used to update the bare forestland value for tax assessment purposes on an annual basis.(7-1-24)

02.Stumpage Value. The stumpage value will be the same as that used in the productivity valuation process by zone.(7-1-24)

03.Bare Forestland Value. After review of the productivity valuation process by March 1 each year, the Tax Commission will review and adjust, as appropriate, the bare forestland values for the current year.(7-1-24)

04.Landowner’s Report. By June 1, of each year the county treasurer will make a written report to include the forest landowner’s name, legal description of forest property owned, and yield taxes paid for the current assessment year. This report will be submitted to the county auditor and a record will be maintained for ten (10) years and not disposed of until the eleventh year.(7-1-24)

IDAPA 35.01.03.965 (Reserved)

IDAPA 35.01.03.966 Recapture of Deferred Taxes on Lands Designated Under Section 63-1706,

IDAHO CODE.

Section 63-1703, Idaho Code Ownership Interest/Deferred Taxes. Where forestland is held in joint ownership, a transfer of ownership for purposes of recapturing deferred taxes will occur when any one (1) of the legal entities holding an ownership interest in the subject property will convey, transfer, or otherwise dispose of their ownership interest or portion thereof. Any such transfer of ownership will subject the entire parcel to recapture of deferred taxes, unless the new owner timely redesignates their ownership interest under Section 63-1706, Idaho Code.(7-1-24)

02.Deferred Tax Responsibility. Deferred taxes will be the responsibility of the selling landowner.

Deferred taxes will constitute a lien on the land.(7-1-24)

03.Change in Use/Deferred Taxes. For forestland designated under Section 63-1706, Idaho Code, but subject to recapture of deferred taxes as provided in Section 63-1703, Idaho Code, because of a change in use with no change in ownership, recapture of deferred taxes will be calculated in the following manner:(7-1-24)

a.The difference between the current bare land value for the correct class of land in the forest value zone in which the parcel lies and the current market value for assessment purposes of the property during the current year;(7-1-24)

b.Multiplied by the current levy for the tax code area or areas in which the parcel lies;(7-1-24)

c.Multiplied by the number of years, including the entire current year, the lands have been subject to designation under Section 63-1706, Idaho Code, not to exceed ten (10) years. Additionally, a credit will be allowed for any yield tax paid up to the amount of the deferred taxes.(7-1-24)

04.Transfer of Ownership/Deferred Taxes. For forestland designated under Section 63-1706, Idaho Code, but subject to recapture of deferred taxes as provided in Section 63-1703, Idaho Code, because of a change in ownership or a removal of the designation, recapture of deferred taxes will be calculated in the following manner:

a.The difference between the current bare land value for the correct class of land in the forest value zone in which the parcel lies and the current productivity value for the correct class of land in the forest value zone in which the parcel lies, for the current year;(7-1-24)

b.Multiplied by the current levy for the tax code area or areas in which the parcel lies;(7-1-24)

c.Multiplied by the number of years, including the entire current year, which the lands have been subject to designation under Section 63-1706, Idaho Code, not to exceed ten (10) years. Additionally, a credit will be allowed for any yield tax paid up to the amount of the deferred taxes.(7-1-24)

05.Investment Lands. Investment lands are defined as those in secondary categories 1, 2, 3, 4, 5, and 9, as defined in Rule 510 of these rules.(7-1-24)

IDAPA 35.01.03.967 (Reserved)

IDAPA 35.01.03.982 Reporting Net Profits of Mines

Sections 63-2801, 63-2802, 63-2803, Idaho Code Amount to be Reported. The amount of money received from the sale of minerals or mined metals during the calendar year immediately preceding the current tax year will be reported by the owner of the mine or mining claim. If there is no sale, but minerals or mined metals are shipped to a smelter or other facility, an amount of money equivalent to that which would have been received from sale of the shipped minerals or mined metals will be reported. Moneys received from rents, commissaries, discounts on purchases, and investments are not to be included.

A separate annual net profit statement will be filed by the owner of mines or mining claims, for each mine or mining claim located in any county in Idaho. The statement filed with any county assessor will not include amounts received pursuant to mines or mining claims located outside the county. The owner will complete the statement on forms prescribed by the Tax Commission.(7-1-24)

02.Additional Allowable Deductions. In addition to deductions specified in Section 63-2802, Idaho Code, the following expenditures can be subtracted from the amount of money or equivalent to be reported: (7-1-24)

a.Expenses for Social Security, worker’s compensation, insurance provided by the employer for the benefit of employees at the mine, fire and water protection, first aid and safety devices, mine rescue materials, experimental work reasonably connected with reduction of the ores;(7-1-24)

b.Expenses for improvements made during the year immediately preceding the current tax year;

c.Expenses for reclamation or remediation not previously deducted, including payments into a sinking fund mandated by law for reclaiming or remediating the mining site.(7-1-24)

03.Non-deductible Items. In addition to expenditures specified as non-deductible pursuant to Section 63-2802, Idaho Code, the following expenditures cannot be subtracted from the amount of money to be reported:

a.Federal, state, and local taxes and license fees;(7-1-24)

b.Depreciation, depletion, royalties, and donations;(7-1-24)

c.Insurance except as listed in Subsection 982.02.a.;(7-1-24)

d.Construction repair, and operation of dwellings, community buildings, and recreational facilities; and(7-1-24)

e.Miscellaneous administrative and other expenses not related to labor, machinery or supplies needed for mining, reducing ores, construction of mills and reduction works, transporting ore and extracting metals and minerals from ore.(7-1-24)

IDAPA 35.01.03.983 (Reserved)

IDAPA 35.01.03.988 Qualified Property for Exemption

Sections 63-302, 63-404, 63-3029B, Idaho Code Definitions. The following definitions apply for the purposes of the property tax exemption under Section 63-3029B, Idaho Code, and do not decide investment tax credit eligibility for Idaho income tax purposes.

a.Year in which the investment is placed in service means the calendar year the property was put to use or placed in a condition or state of readiness and availability for a specifically assigned function in the production of income.(7-1-24)

b.Operator’s Statement is the annual statement listing all property subject to assessment by the Tax Commission and prepared under Section 63-404, Idaho Code.(7-1-24)

c.Personal Property Declaration is any form required for reporting personal property as found in Section 63-302, Idaho Code.(7-1-24)

d.Qualified Investment means property that would have otherwise been taxable for property tax purposes and is eligible or qualified under Section 63-3029B, Idaho Code, provided that property is reported on the personal property declaration or operator’s statement and is designated as exempt from property tax for two (2) years on Form 49E.(7-1-24)

e.Qualified Investment Exemption (QIE) referred to in this rule is the property tax exemption under Section 63-3029B, Idaho Code.(7-1-24)

02.Designation of Property for Which Exemption Is Elected. The owner will designate the property on which the QIE is elected. The owner will make this designation on Form 49E and attach it to a timely filed personal property declaration or, for operating property, the timely filed operator’s statement. The description of the property on Form 49E must be adequate to identify the property to be granted the exemption. In addition to all other steps required to complete the personal property declaration or operator’s statement, the owner must provide on the personal property declaration or operator’s statement the date the item elected for the QIE was placed in service.

03.Election for Investments Not Otherwise Required to Be Listed on the Personal Property Declaration. For investments, like single purpose agricultural or horticultural structures, that are not otherwise required to be listed on the personal property declaration, the owner must list that property to elect the QIE. As with any property designated for the QIE, the owner must attach Form 49E to the personal property declaration. (7-1-24)

04.Continuation of Listing. For all property designated for QIE, even though that property is exempt for two (2) years, the owner must list that property on the personal property declaration or operator’s statement in the initial year for which the QIE is claimed and the following four (4) consecutive years, unless that property has been sold, otherwise disposed of, or ceases to qualify pursuant to Section 63-3029B, Idaho Code.(7-1-24)

05.Period of QIE. The QIE will be granted for the two (2) calendar years immediately after the end of the calendar year in which the property acquired as a qualified investment was first placed in service in Idaho.

06.Election Specificity . The QIE election provided by Section 63-3029B, Idaho Code, will be specific to each qualified item listed on the personal property declaration or operator’s statement. An item that is a qualified investment, but for which there is no QIE election during the year after the “calendar year in which the investment is placed in service” in Idaho, is not eligible for the QIE.(7-1-24)

07.Notification by Assessor.(7-1-24)

a.Upon Receipt of Form, the assessor will review the application and determine if the taxpayer qualifies for the property tax exemption under Section 63-3029B, Idaho Code. If the assessor determines that the property tax exemption should be granted, the assessor will notify the taxpayer and send a copy of this form or listing to the Tax Commission.(7-1-24)

b.Upon Discovery of Changes. Upon discovering that property granted the QIE was sold, otherwise disposed of, or ceased to qualify under Section 63-3029B, Idaho Code, within the five (5) year period beginning with the date the property was placed in service, the assessor will notify the Tax Commission and the taxpayer immediately. The assessor will also provide this notification upon discovery that the owner first claiming the QIE failed to list the item on any personal property declaration or failed to file a personal property declaration in any year during this five (5) year period. This notice will include:(7-1-24)

i.Name of the owner receiving the QIE.(7-1-24)

ii.A description of the property that received the QIE.(7-1-24)

iii.State whether the individual item was purchased new or used.(7-1-24)

iv.The date the owner reported the item was first placed in service in Idaho.(7-1-24)

v.For each item, the amount of exempt value in the first year the QIE was elected and an identification of the year.(7-1-24)

vi.For each item, the amount of exempt value in the second year after the QIE was elected.(7-1-24)

vii.For each item, the number of the tax code area within which that item was located.(7-1-24)

c.Denial of the QIE. Upon review of the taxpayer’s application, if the assessor determines that the property tax exemption should not be granted for all or part of the market value of any item or items, then the board of county commissioners will deny the exemption for those items. The assessor will notify the taxpayer electing the QIE and will identify the basis for the denial. The assessor’s notification cancels the election with respect to those items. Upon receiving this notification, the taxpayer is then free to pursue the income tax credit under Section 63- 3029B, Idaho Code, for those items denied the QIE by the board of county commissioners. The assessor will send a copy of the notification to the Tax Commission.(7-1-24)

08.Moved Personal Property. In order to provide unmistakable identification of the property, certain taxpayers must send written notification by the date provided in Section 63-302, or 63-404, Idaho Code, when moving property that previously received the QIE. This notification:(7-1-24)

a.Is required of taxpayers moving locally assessed property between counties in Idaho during the five (5) year period beginning the date that property was placed in service;(7-1-24)

i.The taxpayers will send this notification to the assessor in the county that granted the QIE and the assessor in the Idaho county to which the property has been moved.(7-1-24)

ii.The taxpayers must include a listing which describes the property exactly as it was described on the original Form 49E or cross references the property originally listed on Form 49E.(7-1-24)

iii.The assessor receiving such notification will forward it to the Tax Commission.(7-1-24)

b.Is not required of taxpayers when the property is Tax Commission assessed non-regulated operating property.(7-1-24)

09.Partial-Year Assessments. Property assessed based on a value prorated for a portion of the year in which the property is first placed in service may still be eligible for the QIE in the subsequent two (2) calendar years, provided the QIE is elected.(7-1-24)

10.Limitation on Amount of Exemption.(7-1-24)

a.New Property. The QIE will be for the full market value for assessment purposes for new property that is a qualifying investment.(7-1-24)

b.Used Property. The QIE for used property placed in service during a taxable year for income tax purposes will be limited. For each taxpayer, the QIE will be the lesser of the QIE cost or the current year’s market value in accordance with the following procedure:(7-1-24)

i.QIE cost will be determined for each item of used property upon which the QIE is claimed. QIE cost is the lesser of an item’s cost or one hundred fifty thousand dollars ($150,000); provided, however, that the QIE cost for all elected used property will not exceed one hundred fifty thousand dollars ($150,000) in a taxable year. In the event the cost of one (1) or more items of used property exceeds one hundred fifty thousand dollars ($150,000), QIE cost will reflect the reduction necessary to stay within the one hundred fifty thousand dollar ($150,000) limit (See IDAPA 35.01.01, “Income Tax Administrative Rules,” Rule 719 for information on the selection of items of used property).(7-1-24)

ii.For each item purchased used, the QIE will be limited to the lesser of the QIE cost or the current year’s market value.(7-1-24)

c.Used Property Placed in Service by Fiscal Year Taxpayer. If a taxpayer had a fiscal year beginning July 1, 2004, and placed one hundred fifty thousand dollars ($150,000) of qualifying used property in service on May 15, 2004, and an additional one hundred fifty thousand dollars ($150,000) of qualifying used property in service on August 1, 2004, the taxpayer would qualify for an exemption of up to three hundred thousand dollars ($300,000) on this used property in 2005 and 2006. The exempt value in the second year of the exemption could not exceed the lesser of three hundred thousand dollars ($300,000) or the (depreciated) market value of this used property. (7-1-24)

11.Multi-County Taxpayers.(7-1-24)

a.Except taxpayers electing QIE for property that is Tax Commission assessed operating property, any taxpayers electing the QIE for properties purchased new must indicate on Form 49E the county where each property is located or must complete a separate Form 49E and attach it to the personal property declaration submitted to each county.(7-1-24)

b.Except taxpayers electing QIE for property that is Tax Commission assessed operating property, any taxpayers electing the QIE for properties purchased used must attach any Form 49E listing property purchased used to the personal property declaration sent to each county. A Form 49E may be provided to comply with this requirement.( 7-1-24)

c.Any taxpayers electing QIE for property that is Tax Commission assessed non-regulated operating property and purchased new or used must indicate on Form 49E each county where each property is located and attach it to the operator’s statement.(7-1-24)

d.If multiple Form 49Es are submitted to one (1) or more assessors, a copy of each Form 49E must be attached to the correct year’s income tax return.(7-1-24)

12.Special Provisions for Non-regulated Operating Property.(7-1-24)

a.For non-regulated operating property, the market value of the QIE is calculated by multiplying the depreciated original cost of the property times the ratio of the correlated value determined under Subsection 405.08 of these rules to the cost approach value determined under Subsection 405.02 of these rules.(7-1-24)

b.The following special provisions apply for the reduction in market value of non-regulated operating property resulting from QIE being elected.(7-1-24)

i.Reduction in Idaho value. For non-regulated operating property except situs property, the reduction in market value will be made by subtracting the market value of the QIE from the allocated Idaho value before apportionment to any taxing district or unit.(7-1-24)

ii.Reduction in market value of situs property owned by non-regulated operating property companies.

For situs property owned by non-regulated operating property companies, the reduction in market value will be made by subtracting the market value of the specific investment in the specific location.(7-1-24)

13.Cross Reference. For more information relating to procedures and requirements for QIE, refer to Section 63-3029B, Idaho Code, and IDAPA 35.01.01, “Income Tax Administrative Rules,” Rule 719. For information relating to recapture of QIE, refer to Rule 989 of these rules.(7-1-24)

IDAPA 35.01.03.989 Qualified Investment Exemption (qie) Recapture

Section 63-3029B, Idaho Code

01.In General. If a taxpayer has elected the property tax exemption (also known as the QIE) allowed by Section 63-3029B, Idaho Code, for property sold or otherwise disposed of prior to being held five (5) full years from the date placed in service, or property that ceases to qualify or failed to originally qualify pursuant to Section 63-3029B, Idaho Code, the property tax benefit will be subject to recapture.(7-1-24)

02.Notification by Taxpayer That Property Ceases to Qualify. If an item on which a taxpayer claimed the QIE ceases to qualify during the recapture period or was incorrectly claimed by the taxpayer as qualified investment, the taxpayer will provide notification of the amount owing and will remit said amount to the Tax Commission by the due date of that taxpayer’s income tax return. Notification will be accomplished by filing Tax Commission Form 49ER.(7-1-24)

03.Notification in Case of Failure by Taxpayer to File Form 49ER. If any taxpayer who is required to file Form 49ER fails to do so by the date specified in Subsection 989.02 of this rule, the Tax Commission will issue a Notice of Deficiency in the manner provided in Section 63-3045, Idaho Code, to the taxpayer who claimed the QIE.

The notice will show the calculation of the recaptured property tax benefit.(7-1-24)

04.Protest of Recapture. If a taxpayer does not agree with the Notice of Deficiency issued to assert the recapture, the taxpayer may file a protest with the Tax Commission to request a redetermination of the deficiency.

The protest will meet the requirements as provided in Section 63-3045, Idaho Code, and IDAPA 35.02.01, “Tax Commission Administrative and Enforcement Rules,” Rule 320.(7-1-24)

05.Property Tax Benefit Subject to Recapture. For any item determined to be subject to the recapture of the property tax benefit under Section 63-3029B(4)(d), Idaho Code, the taxpayer will multiply the exempt value of the property by the applicable average property tax levy determined by the Tax Commission under Subsection 989.06 or 989.07 of this rule. See Table for Reduction of Property Tax Benefit Subject to Recapture at https://tax.idaho.gov. The taxpayer will report this calculation on Form 49ER and will submit this form and remit the amount calculated to the Tax Commission no later than the date indicated in Section 989.02 of this rule.(7-1-24)

06.County Average Property Tax Levy -- Locally Assessed Property Located in One (1) County or Non-apportioned Centrally Assessed Property. For locally assessed property located in one (1) county or nonapportioned centrally assessed property, the Tax Commission will compute and report the county average property tax levy according to the following procedure.(7-1-24)

a.Property Tax Budget Summation - General. Except as provided in Paragraph 989.06.b. of this rule, for each year, sum the property tax portion of the annual budget of each taxing district wholly located within the county for which the average levy is to be calculated. This is the approved amount found on the taxing district’s L-2 Form in the column entitled “Balance to be levied” as described in Rule 803 of these rules. To this amount, add the prorated portion of the approved “Balance to be levied” for any taxing district located partially within the county for which the average levy is to be calculated. The prorated portion is determined by multiplying the levy for the taxing district by the net taxable value (as defined in Section 63-803(4), Idaho Code) of the portion of the taxing district within the county for which the average levy is to be calculated.(7-1-24)

b.Property Tax Budget Summation - Special Rules for Counties with Urban Renewal Revenue Allocation Areas. This provision is applicable when taxing districts in the county have funds with levies calculated including all or part of an urban renewal revenue allocation area increment value pursuant to Sections 50-2908(1)(a) through (e), Idaho Code.(7-1-24)

i.For any such fund, the prorated portion is determined by multiplying the levy of the fund by the net taxable value within the county, including the increment value, used to determine the levy for that fund.(7-1-24)

ii.For any such fund for which the entire increment value is added to the net taxable value before computing the levy, the sum of the property tax portion of the annual budgets and prorated portions of such budgets must be determined.(7-1-24)

iii.For any such fund for which part of the increment value is added to the net taxable value before computing the levy, the sum of the property tax portion of the annual budgets and prorated portions of such budgets must be determined.(7-1-24)

iv.Provided that some taxing district funds within the county are subject to the levy calculation procedures identified in Subparagraphs 989.06.b.ii. and/or iii. of this rule, for all funds other than those identified in this rule, the sum of the property tax portion of the annual budgets and prorated portions of such budgets must be determined.(7-1-24)

c.Average Property Tax Levy.(7-1-24)

i.For counties without urban renewal revenue allocation areas, the average property tax levy will be computed by dividing the total of the property tax budgets computed in Paragraph 989.06.a. of this rule, by the net taxable value (as defined in Section 63-803(4), Idaho Code) of the county for which the average levy is to be calculated.(7-1-24)

ii.For counties with urban renewal revenue allocation areas and funds with levies calculated including all or part of urban renewal revenue allocation area increment value pursuant to Sections 50-2908(1)(a) through (e), Idaho Code, the average property tax levy will be computed by summing the quotients determined by dividing the sums determined in Subparagraphs 989.06.b.ii., iii., and iv., by the net taxable value of the county including the entire increment value, part of the increment value, or none of the increment value, depending on whether all, part, or none of the increment value has been used to determine the levy.(7-1-24)

d.Notice to Each County Auditor. The Tax Commission will notify each county auditor of the county’s current year’s average property tax levy no later than the first Monday in December each year.(7-1-24)

07.Statewide Average Property Tax Levy -- Locally Assessed Property Located in More Than One County or Apportioned Centrally Assessed Property. For locally assessed property located in more than one (1) county or apportioned centrally assessed property, the Tax Commission will determine the average urban property tax levy of the state and will notify each county auditor of said average no later than the first Monday in December each year .(7-1-24)

08.Noticing Remittance for the Recapture of the Property Tax Benefit. When the Tax Commission remits to a county the property tax benefit recaptured under Section 63-3029B(4)(f), Idaho Code, it will include with this remittance a notice identifying the following:(7-1-24)

a.Owner. Name of the owner receiving the QIE;(7-1-24)

b.Property Description. A description of the property that received the QIE;(7-1-24)

c.First Year Value of QIE. The amount of exempt value in the first year the QIE was elected and an identification of the year;(7-1-24)

d.Second Year Value of QIE. The amount of exempt value in the second year after the QIE was elected;(7-1-24)

e.Tax Code Area Number. The number of the tax code area within which that item was located; and

f.Amount Remitted. The amount of money remitted for any item.(7-1-24)

09.No Allocation of Remittances to Urban Renewal Agencies. Remittances received by a county for property tax benefits recaptured under Section 63-3029B(4)(f), Idaho Code, will not be subject to allocation to urban renewal agencies.(7-1-24)

10.Penalty and Interest. Penalty and interest will be determined as provided in Sections 63-3045 and 63-3046, Idaho Code. Penalty and interest will be computed from the due date found in Subsection 989.02 of this

11.Cross Reference. For more information relating to QIE, refer to Section 63-3029B, Idaho Code, and Rule 988 of these rules.(7-1-24)

IDAPA 35.01.03.990 (Reserved)

IDAPA 35.01.03.995 Certification of Sales Tax Distribution

Section 63-3638, Idaho Code Most Current Census. Population is estimated using the most current census or estimate of city and county populations during the quarter for which sales tax money is distributed. Such estimates can be found at the Bureau of the Census at: https://www.census.gov/programs-surveys/popest/data/tables.html.(7-1-24)

02.Current Fiscal Year. For distribution purposes, the current fiscal year begins with the distribution made in October, following collection of sales taxes in July, August, and September.(7-1-24)

03.Incorporated City. To qualify for sales tax distribution, an incorporated city is one (1) with a duly elected mayor and city council.(7-1-24)

04.Determination Date and Eligibility.(7-1-24)

a.Except as provided in Paragraph 995.04.b. of this rule, the eligibility of each city for revenue sharing monies pursuant to Section 63-3638(10)(a), Idaho Code, is determined as of July 1 of the current year. Cities not receiving distributions in fiscal year 2020 are ineligible to receive monies under Section 63-3638(10)(a), Idaho

b.Taxing districts that are out of compliance with the requirements of Section 67-1076, Idaho Code, are ineligible for quarterly distributions provided under Section 63-3638(10), Idaho Code. Once the Tax Commission is notified by the State Controller’s Office that the district is complying, quarterly distributions resume, including any amounts previously withheld under these provisions.(7-1-24)

05.Quarterly Certification. Except if shares are required to be withheld pursuant to Section 67-1076, Idaho Code, the Tax Commission will certify quarterly to each county clerk the distributions required pursuant to Section 63-3638(10)(c), Idaho Code, and the distributions to cities and counties required pursuant to Section 63- 3638(10)(a) and (b), Idaho Code.(7-1-24)

a.Shares distributed quarterly pursuant to Section 63-3638(10)(a), (b), or (c), Idaho Code, are termed revenue sharing. The distribution found in Section 63-3638(10)(b)(ii)(1), Idaho Code, in the amount of one million three hundred twenty thousand dollars ($1,320,000), is considered an annual amount divided into four (4) equal shares.(7-1-24)

b.The Tax Commission will withhold authorized payments to cities, counties, or special purpose taxing districts to comply with the requirements of Section 67-1076, Idaho Code. The Tax Commission will publish a report on its website to notify the county of the district, which is failing to comply, and the amount being withheld.

Once the Tax Commission is notified by the state controller that a previously non-compliant taxing district has achieved compliance, the Tax Commission will distribute withheld funds with the next quarterly sales tax distribution.(7-1-24)

c.Urban renewal agencies failing to comply with the reporting requirements found in Section 50- 2913, Idaho Code, will have authorized payments identified in Section 63-3638(13), Idaho Code, withheld. Once the urban renewal agency complies with the necessary reporting requirements, the Tax Commission will distribute the withheld funds with the next quarterly sales tax distribution.(7-1-24)

06.Corrections.(7-1-24)

a.Corrections of distribution errors are made in the following quarterly distribution(s) of the current fiscal year. Corrections occurring in the final quarter of the fiscal year are made as soon as possible in the following fiscal year.(7-1-24)

b.The Tax Commission will notify affected county clerks when the Tax Commission becomes aware of an error in distributions.(7-1-24)

IDAPA 35.01.03.996 (Reserved)

35.01.02 Idaho Sales and Use Tax Administrative Rules

IDAPA 35.01.02.001 Scope

These rules are construed to reach the full jurisdictional extent of the state of Idaho’s authority to impose an excise tax upon each sale at retail of the sales price of all property subject to taxation under this act and on the storage, use, or other consumption in this state of tangible personal property.(7-1-26)

IDAPA 35.01.02.002 (Reserved)

IDAPA 35.01.02.011 Mixed Transactions

Sections 63-3609, 63-3612, 63-3613, Idaho Code

01.Retail Sales of Tangible Personal Property Together with Services. The sales tax applies to retail sales of tangible personal property. When a retail sale of tangible personal property includes services, the total amount charged is taxed, except those services excluded by statute. To determine whether a transaction is a retail sale of tangible personal property or a sale of services, the following tests are applied.(7-1-26)

a.The taxability of a mixed transaction is determined by analyzing the object of the transaction and whether the buyer is seeking the service itself or the property produced by the service. If the tangible personal property is the object of the transaction, then the entire transaction is taxable. If the service is the object of the transaction, then it will depend on whether the transfer of the tangible personal property is an incidental part of the transaction. If so, then no part of the transaction is taxable.(7-1-26)

i.To determine whether a mixed transaction qualifies as a sale of services, the object of the transaction will be determined; that is, whether the buyer is seeking the service itself, or the property produced by the service.(7-1-26)

ii.When a retail sale involves the transfer of tangible personal property and the performance of a service, both of which are independent elements whose charges are separately stated, then the taxability of each charge is analyzed on its own.(7-1-26)

02.Examples. Available at Sales and Use Tax Examples.(7-1-26)

IDAPA 35.01.02.012 Contractors Improving Real Property

Sections 6 3-3609(a), 63-3621, 63-3615(b), 63-3622B, 63-3622D, 63-3622W, 63-3622X, 63-3622NN, 63-3622VV, 63-3622WW, Idaho Code

01.In General. A contractor is any person acting as a general contractor, subcontractor, contractee, subcontractee, or speculative builder who builds, alters, repairs, or improves real property.(7-1-26)

a.Contractors are the consumers of all the goods they use. As a result, they pay tax on their purchase or use of building materials, equipment, tools, and supplies, unless an exemption applies.(7-1-26)

b.If a contractor doesn’t pay tax on the purchase or use of building materials, equipment, tools, and supplies, they report and pay use tax to the state. See Section 072.(7-1-26)

02.Real Property. See Section 067.(7-1-26)

03.Fuels. A contractor pays sale or use tax on fuel used in off-road equipment unless motor fuels tax was paid. See Section 078.(7-1-26)

04.Custom-Made Goods. Sales tax applies to the entire price charged for custom-made goods sold by the maker. If a contractor purchases fabricated goods from a supplier, the entire price of the fabricated item, including the charge for labor is taxable. If the contractor buys material and fabricates it and installs it into a real property improvement, only the material is taxable.(7-1-26)

05.Value. The contractor owes use tax on the value of the job materials at the time they exercise right or power over them. When a contractor fabricates and installs tangible personal property into Idaho real property, the value is the cost of materials and parts used. This is true even if that contractor hires a subcontractor to install.

06.Materials Provided by Project Owner.(3-31-22)

a.When a project owner who isn’t exempt from tax buys materials for a job and hires a contractor to install them, sales or use tax is due when the material is purchased. If the owner doesn’t pay tax on the materials, the contractor is liable for the tax.(7-1-26)

b.When a project owner who is exempt from sales and use tax buys materials for a job and hires a contractor to install them, the contractor is liable for the tax on the value of the materials. This is true even if the property is owned by an exempt entity such as the federal government or an Idaho governmental agency.(7-1-26)

07.Materials Purchased on Behalf of Project Owner.(7-1-26)

a.When a project owner who is exempt from tax allows the contractor to buy building materials in the project owner’s name, the contractor is liable for the tax on the value of the materials.(7-1-26)

b.Contractors can’t avoid paying sales or use tax due to a contract that allows purchases to be made in the name of the exempt entity and designates the contractor as an agent of that entity. The contractor is the consumer of the material and owes tax at the time of purchase.(7-1-26)

IDAPA 35.01.02.013 Road, Paving, and Earthwork Contractors

Sections 63-3609, 63-3615, 63-3619 (f), 63-3622D, Idaho Code

01.In General. This rule illustrates the application of Idaho sales and use tax to specific activities of road, paving, and earthwork contractors. The general principles stated in Section 012 apply to these contractors.

02.Road or Paving Contractor. A road or paving contractor is a contractor improving real property.

The use of materials over which the contractor exercises right or power while performing a contract is taxable. This is true even if an exempt entity, such as a government agency, owns the material. It is also true if the contractor does the work under the full or partial supervision of the person for whom the contractor is performing the contract. (7-1-26)

03.Materials. Use tax doesn’t apply to the use of natural materials such as rock, backfill, or other related materials that are secured on site and used without significant change.(7-1-26)

a.The sale or use of natural materials or rock removed from a construction site and used elsewhere is taxable.(7-1-26)

b.The sale or use of crushed rock that is removed from a construction site and used elsewhere is taxable.(7-1-26)

04.Rock Crushing. The application of sales or use tax to rock crushing operations depends upon the circumstances of the case.(7-1-26)

a.A sale of crushing only is a sale of a taxable processing service. In this circumstance the crusher obtains raw material owned by another, crushes the rock, and stockpiles it for subsequent use either by the owner or a third party. Unless an exemption applies, the crusher charges sales tax.(7-1-26)

b.A contractor who crushes rock obtained on a construction site and uses that rock on the same site is performing a nontaxable service. The processing of such rock, backfill, or other related materials isn’t taxable.

c.If the contractor applying the crushed rock purchases the rock, the purchase price will be taxable. If the contractor applies rock owned by another party, the contractor will be responsible for a use tax on the value of the rock, unless the other party paid a sales tax upon its acquisition. This is true even if a government agency supplied the rock. When a recent purchase of the crushed rock exists, that purchase price is presumed to be the value of the material. When there isn’t a recent purchase, then the value is determined by the current purchase price of like material from the same or a similar source. For the purposes of this section, a purchase made within one (1) year of the performance of the contract is presumed to be a recent purchase price.(7-1-26)

d.A contractor who crushes and applies rock to a road owes tax on the value of the rock whether the contract is performed for a governmental or private entity. The value is to be determined by the royalty or similar charge for raw materials. If a royalty or similar charge doesn’t exist, then the value will be determined as the royalty fee or value of like material from a similar source. If the contractor chooses to have the rock crushed by a subcontractor, the measure of the use tax is on the crushed value.(7-1-26)

e.A sale of rock crushing services to a retailer who will then resell the rock is an exempt sale. The sale of crushed rock to a consumer is a taxable sale unless an exemption applies.(7-1-26)

05.Production Exemption.(3-31-22)

a.A contractor improving real property is the consumer of the materials incorporated into realty and isn’t producing an article for resale. The production exemption doesn’t apply to the equipment and supplies used by a contractor to produce crushed rock, asphalt, or concrete used by the contractor to complete real property improvements.(7-1-26)

b.A business primarily devoted to producing crushed rock, asphalt, or concrete ultimately sold at retail may qualify for the production exemption. See Sections 079 and 082.(7-1-26)

014.CONTRACTORS/RETAILERS. -3609(a), 63-3610, 63-3619, 63-3620, 63-3621, Idaho Code

01.In General. This section illustrates the application of Idaho sales and use tax to contractors who are also retailers. The general principles stated in Section 012 also apply to these contractors.(7-1-26)

02.Sales of Both Tangible Personal Property and Improvements to Real Property. If a contractor makes retail sales of tangible personal property and improvements to real property, the contractor collects sales tax on the retail portion of the contract.The contractor pays sales or use tax on the materials used to perform the real property improvement.(7-1-26)

03.Tangible Personal Property vs. Improvements to Real Property. Built-in appliances and related items become fixtures to realty when installed in buildings. Such built-in appliances include dishwashers, microwave ovens, stove tops, refrigerators, stove hoods, central vacuum systems, waste disposal units, trash compactors, water softeners, water purification systems, and garage door openers. Some appliances retain the character of tangible personal property such as microwave ovens that are not built-in, such as free-standing stoves, refrigerators, washers, and dryers. See Section 067 for application of the three-factor test.(7-1-26)

04.Sales with Agreement to Install. An over-the-counter sale of a complete unit with an agreement to install it isn’t a contract to improve real property if the item doesn’t become affixed to reality. This applies to sales of free-standing stoves, refrigerators, washing machines, dryers, and other appliances. The seller collects sales tax from the buyer on the retail sales price of the item. If the installation charges are properly separated, sales tax is due only on the cost of the unit.(7-1-26)

05.Record Keeping. A contractor can follow any consistent procedure to account for inventory and job materials purchases.(7-1-26)

a.When a contractor is primarily performing contracts to improve real property, that contractor can choose to pay tax on all purchases. When tangible personal property is sold at retail in Idaho, the contractor collects and remits sales tax and requests a refund for the Idaho sales tax originally paid. See Section 117 for refund instructions.(7-1-26)

b.When a contractor is primarily making retail sales, they can choose to purchase all inventory without paying tax by giving suppliers a properly completed resale certificate. When tangible personal property is sold at retain in Idaho, the contractor collects and remits sales tax. When the contractor removes materials from nontaxed inventory to improve real property, they pay Idaho use tax on the value of those materials.(7-1-26)

06.Inventory Withdrawals. When any withdrawal is made from nontaxed inventory, use tax is due to the state when the material is delivered to the job site, regardless of when it is used in performing a contract. (7-1-26)

a.When a contractor fabricates tangible personal property, puts it into inventory, and later withdraws it for a job, tax applies to the fully fabricated value. This is true regardless of whether the fabricator installs the property themself or through an agent or subcontractor.(7-1-26)

IDAPA 35.01.02.015 Well Drillers/Pump Installers

Sections 63-3609(a), 63-3621, 63-3615(b), 63-3622D, 63-3622W, Idaho Code

01.In General. This rule illustrates the application of Idaho sales and use tax to contractors who drill wells or install pumps. The general principles stated in Sections 012 and 014 also apply to these contractors. (7-1-26)

02.Types. The types of wells covered by this section include, but are not limited to:(7-1-26)

a.Water wells, including those for municipal, domestic, commercial, and industrial purposes, and wells used for agricultural irrigation.(3-31-22)

b.Monitor wells used to check for contamination or to find the water table.(3-31-22)

c.Anode wells used to ground power or gas lines.(3-31-22)

d.Construction wells used for pilings, shoring, and elevator hoists.(3-31-22)

e.Natural gas and oil wells.(7-1-26)

f.Injection wells.(7-1-26)

03.Well Drilling. A well driller is a contractor improving real property. The contractor should not charge sales tax on materials such as casing, screens, piping, etc., used to construct or repair a well as these materials are consumed by the well driller.(7-1-26)

04.Pump Installation. The three-factor test as discussed in Section 067 is used to determine if a pump is taxable as a real property improvement or as tangible personal property.(7-1-26)

a.A pump installed with a well that supplies water to land or a building is presumed to be a real property improvement.(7-1-26)

b.A pump that doesn’t supply water to land or a building and is used in commercial or industrial applications is presumed to be tangible personal property unless it is so integrated into the real estate that it is a permanent fixture.(7-1-26)

05.Exemptions. In some cases, exemptions may apply to materials installed by well drillers and pump installers as provided in Idaho Code. Exemptions apply only to project materials and not to construction equipment and supplies, such as drilling rigs and drill bits.(7-1-26)

06.Examples. Available at Sales and Use Tax Examples.(7-1-26)

IDAPA 35.01.02.016 (Reserved)

IDAPA 35.01.02.017 Dining on Airlines, Buses, and Rail Transportation

Sections 63-3612, 63-3613, 63-3615, 63-3621, Idaho Code

01.Sale of Meals. The sale of meals or drinks that are not included in the price of the ticket on commercial aircraft, railway dining cars or buses operating in Idaho is a retail sale. An airline, bus company or passenger train is operating in Idaho if a trip starts or ends in Idaho and part of the trip can be allocated to Idaho.

02.Taxable Sales. The gross receipts of such a sale are taxable when the meals, beverages or other tangible personal property are ordered or served within the boundaries of Idaho. It doesn’t matter whether the meals and other property are consumed in Idaho.(7-1-26)

03.Formula for Taxable Sales. A formula may be used to determine the taxable sales of meals and beverages on the trip if accurate records of actual sales are not kept.(7-1-26)

a.Formula. Calculate the percentage of trip miles in Idaho in relation to the total mileage of the trip.

Multiply this percentage by the total sales of meals and beverages served on the entire trip.(7-1-26)

04.Meals, Snacks, Beverages or Other Tangible Personal Property. When the price of an airline, bus, or railway ticket includes meals, snacks, beverages, or other tangible personal property, the cost of these goods is subject to use tax. An airline, bus, or rail company that purchases these goods in Idaho, pays Idaho sales tax to the vendor, regardless of where the goods will be distributed to passengers. If these goods are purchased in another state and no sales or use tax has been paid to that state, the cost of the goods distributed to passengers on trips that start or end in Idaho is subject to use tax. In the absence of accurate records, the provider may determine taxable use based on trip miles.(7-1-26)

IDAPA 35.01.02.018 (Reserved)

019.SALES BY COUNTY SHERIFFS. -3612, 63-3620, Idaho Code A county sheriff who sells tangible personal property will collect and remit sales tax. This includes sales pursuant to a court order or a summary notice and sale foreclosure procedure.(7-1-26)

020.AUCTIONEER, AGENT, BROKER, DISTRIBUTOR AND FACTORS. 3610, Idaho Code Every auctioneer, agent, broker, distributor and factor acting for a principal, or entrusted with any bill of lading, custom house permit for delivery or any tangible personal property for the purpose of sale, collects and remits sales tax on those sales. This is true even if the principal or owner of the property would not have had a requirement to do

so.(7-1-26)

021.MULTI-LEVEL MARKETING FIRMS. -3610, 63-3612, Idaho Code

01.Multi-Level Marketing Firm. A multi-level marketing firm is an organization that can convey to a person the right to sell a product and the right to convey those rights to another person.(3-31-22)

02.Requirement of Multi-Level Marketing Firms to Collect Tax. Multi-level marketing firms collect the sales and use tax on all tangible personal property sold by the multi-level marketing firm through such agents, whether or not the agents are independent contractors.(7-1-26)

022.DROP SHIPMENTS (RULE 022). -3615A, 63-3619, 63-3620, 63-3621, 63-3622, Idaho Code

01.In General. Drop shipping is an order fulfillment method where a business can’t have the products it sells in stock. The seller bills the buyer and has a third party (generally a manufacturer or distributor) fulfill the order by shipping the goods to the buyer.(7-1-26)

2. Parties to the Contract. There are two (2) sales contracts in a drop shipment. One (1) is between the seller and the buyer. The other is between the seller and the third-party shipper.(7-1-26)

a.The seller collects Idaho sales tax from the buyer, if mandated. Since there is no sales transaction between the third-party shipper and the buyer, the shipper isn’t mandated to collect sales tax.(7-1-26)

b.If the third-party shipper is mandated to have an Idaho Seller’s Permit, the shipper documents the exempt sale between the shipper and the seller with a properly executed resale/exemption certificate.(7-1-26)

c.The matrix below outlines the sales tax responsibilities of the shipper:

d.The matrix below outlines the sales tax responsibilities of the seller:

IDAPA 35.01.02.023 (Reserved)

IDAPA 35.01.02.024 Rentals or Leases of Tangible Personal Property (rule 024)

Sections 63-3609, 63-3612, 63-3613, 63-3616, 63-3622UU, Idaho Code

01.Bare Equipment Rental. A bare equipment rental is a rental of equipment without an operator and is a taxable sale. The owner of the equipment is a retailer and is required to collect and remit Idaho sales tax on each rental payment. The equipment owner who primarily rents bare equipment may buy the equipment and repair parts without paying tax to the vendor by giving the vendor a properly executed resale certificate. If the equipment owner uses the rental equipment for their own benefit or in their own business operations, the equipment owner pays use tax based on a fair market rental value for the period during which they used their own equipment.(7-1-26)

02.Fully Operated Equipment Rentals.(3-31-22)

a.A fully operated equipment rental is an agreement in which the owner or supplier of the equipment or property supplies the equipment or property along with an operator, and the property supplied is of no value to the Obtain Properly executed Resale/Exemption Certificate or Collect Tax Obtain Letter of No Nexus or Collect Tax Don’t Collect Tax from Customer / Use Tax Owed by Customer Don’t Collect TaxDon’t Collect Tax Don’t Collect Tax from Customer / Use Tax Owed by Customer Provide Properly executed Resale/Exemption Certificate None Collect Tax from Customer Give Letter of No NexusNone Don’t Collect Tax from Customer / Use Tax Owed by customer without the operator. A fully operated equipment rental is a nontaxable service.(7-1-26)

b.The owner or supplier of the equipment or property used in a fully operated equipment rental is the consumer of the equipment or property and owes tax when they buy or use that equipment or property in Idaho. The owner who rents fully operated equipment can’t buy repair parts tax exempt. Special rules apply to transient equipment used for short periods in Idaho. See Subsection 073.03.(7-1-26)

c.If the equipment or property has value to the customer without an operator, then the lease or rental of the equipment or property is a distinct transaction. It is taxable and its price will be stated separately from the price of the service provided by the operator.(7-1-26)

03.Mixed Use of Rental Equipment.(3-31-22)

a.If the equipment owner primarily rents bare equipment but sometimes supplies equipment with an operator, the equipment owner is the consumer of the equipment while it is used by the supplied operator to perform a service contract. Accordingly, the equipment owner will pay use tax on the fair market rental value of the equipment for that period of time unless they pay tax when they bought the equipment.(7-1-26)

b.If the equipment owner primarily rents fully operated equipment but sometimes rents bare equipment, he charges sales tax on the rental of the bare equipment even though tax was paid on the original purchase of the property. In this case, the owner purchased the equipment for a purpose other than the resale or re-rental of that property in the regular course of business.(3-31-22)

04.Operator Obligated to Be Paid by Customer. In some cases, an equipment owner supplies equipment along with an operator but a contract or a state or federal law requires the customer to pay the operator. If all other indications of an employee-employer relationship, such as the right to hire and fire, immediate direction and control, etc., remain with the equipment owner, the owner is viewed as supplying a service and no sales tax applies to the service fee. However, the fact that the transaction is a fully operated equipment rental needs to be clearly stated on the face of the invoice or other billing document. The Commission may examine the facts on a case-by-case basis to determine if a true employer-employee relationship exists between the equipment owner and the operator.(7-1-26)

05.Rentals to Exempt Entities. The rental or lease of equipment invoiced directly to an entity exempt from sales tax isn’t taxable. However, if the rental or lease is to an individual or organization performing a contract for, or working for an exempt entity, the rental is taxable.(7-1-26)

06.Rental Payments Applied to Future Sales. Rentals to be applied toward a future sale or purchase are taxable.(3-31-22)

07.Out-of-State Rental/Lease. Rental or lease payments on bare equipment used outside Idaho aren’t subject to Idaho sales tax. If the equipment is delivered in Idaho, even though it will be used outside the state, then the rental or lease payment for the first rental period is subject to Idaho tax.(7-1-26)

08.Lease-Purchase and Lease with Option to Purchase.

a.Lease-purchase. An agreement where the ownership of the leased property passes to the buyer at the end of the stated terms of the contract with no additional consideration from the buyer, or where the additional consideration doesn’t represent the fair market value of the property. A lease-purchase is a retail sale and tax is collected on the entire sales price on the date the property is delivered.(7-1-26)

b.Lease with an option to purchase. An agreement where the ownership of the leased property remains with the seller over stated terms of the contract and the seller keeps the leased property unless the buyer exercises an option to buy it at fair market value. The seller will collect sales tax for each lease payment and the buyout if the buyer exercises the option at the end of the contract.(7-1-26)

IDAPA 35.01.02.025 (Reserved)

IDAPA 35.01.02.027 Computer Equipment, Software, and Data Services

Sections 63-3613, 63-3616, Idaho Code 01. Definitions. For purposes of this section, the following terms will have the following meanings:

a.Computer. A programmable machine or device having information processing capabilities that includes word, data, and math processing equipment, testing equipment, programmable microprocessors, and any other integrated circuit embedded in manufactured machinery or equipment.(7-1-26)

b.Computer Hardware. A physical computer assembly and all peripherals, whether attached physically or remotely by any type of network, and includes all equipment, parts and, supplies.(7-1-26)

c.Computer Program. A sequence of instructions written for the purpose of performing a specific operation on a computer.(7-1-26)

d.Storage Media. Storage media include, but are not limited to, hard disks, optical media discs, diskettes, magnetic tape data storage, solid state drives, and other semiconductor memory chips used for nonvolatile storage of information readable by a computer. (3-31-22)

e.Cloud Storage. A method of storing digital data on remote servers, accessible via the internet, rather than on a physical device or local network, managed by a third-party provider.(7-1-26)

02.Canned Software. When a sale of canned software is taxable, tax applies to the entire amount charged to the customer. If the consideration consists of license fees, royalty fees, right to use fees or program design fees, whether for a period of minimum use or for extended periods, all fees are included in the taxable price. The taxability of canned software depends on how it is delivered.(7-1-26)

a.If it is sold using a physical package but the package doesn’t contain the canned software on storage media, it isn’t tangible personal property and the sale isn’t taxable. A printed key code sold in a box that allows the user to download canned software and activate the canned software using the key code isn’t taxable.

03.Maintenance Contracts. Maintenance contracts sold in connection with the sale or lease of taxable canned software generally provide that the buyer will be entitled to receive periodic program enhancements and error correction, often referred to as upgrades, either on storage media or through remote telecommunications.

The maintenance contract may also provide that the buyer will be entitled to telephone or on-site support services.

a.Mandatory maintenance contract. If the maintenance contract is a condition of the sale, lease, or rental of taxable canned software, the sales price is taxable. Tax applies whether or not the charge for the maintenance contract is separately stated from the charge for software. In determining whether an agreement is optional or mandatory, the terms of the contract will be controlling.(7-1-26)

b.Optional maintenance contract. If the maintenance contract is optional to the buyer of taxable canned software:(7-1-26)

i.Then only the portion of the contract fee representing upgrades is taxable if the fee for any mai ntenance agreement support services is separately stated and the upgrades are delivered on storage media;

ii.If the fee for any maintenance agreement support services isn’t separately stated from the fee for upgrades and the upgrades are delivered on storage media, then fifty percent (50%) of the entire charge for the maintenance contract is taxable;(7-1-26)

iii.If the maintenance contract only provides upgrades delivered on storage media, and no maintenance agreement support services, then the entire sales price of the contract is taxable;(3-31-22)

iv.If the maintenance contract only provides support services, and the customer isn’t entitled to or doesn’t receive any canned computer software upgrades or enhancements, then the sale of the contract isn’t taxable.

c.If an optional software maintenance contract provides for software updates to be delivered electronically but also allows a customer to receive software updates on storage media, no portion of the contract is taxable unless the customer receives software updates on storage media.(3-31-22)

04.Reports Compiled by a Computer. The sale of statistical reports, graphs, diagrams, or any other information produced or compiled by a computer and sold or reproduced for sale in substantially the same form as it is produced is a sale of tangible personal property and is taxable if the final product is printed or delivered in an electronic format on storage media. If a report is compiled from information furnished by the same person to whom the finished report is sold, the report will be taxable unless the person selling the report performs some sort of service regarding the data or restates the data in substantially different form than that from which it was originally presented or delivers the report to the buyer electronically.(7-1-26)

a.When additional copies of records, reports, manuals, tabulations, etc., are provided, tax applies to the charges for those copies.(7-1-26)

05.Cloud or Remote Data Storage. Charges to store data on storage media owned and controlled by another party is a nontaxable service.(7-1-26)

06.Training Services. Separately stated charges for training services are not taxable, unless they are incidental services agreed to be rendered as a part of the sale of tangible personal property.(7-1-26)

a.When separate charges are made for printed training materials such as books or manuals sales tax applies.(7-1-26)

b.When training materials are provided at no cost to the buyer in conjunction with the sale of tangible personal property, the training materials are included in the sales price of the tangible personal property.(7-1-26)

c.When no tangible personal property is sold and training materials are provided at no charge to the customer, the provider of the training is the consumer of the training materials and pays sales or use tax on the value of the materials.(7-1-26)

07.Custom Software. Tax doesn’t apply to the transfer of custom software or custom programming services performed in connection with the sale or lease of computer equipment if such charges are separately stated from the charges for the equipment.(7-1-26)

a.Custom programming charges not separately stated from the sale or lease of equipment are taxable.

b.Custom software includes a program prepared for the special order of a customer who will use it to produce and sell or lease copies of the program. The resale of the program by the customer for who the custom software was prepared is a sale of canned software.(7-1-26)

08.Examples. A vailable at Sales and Use Tax Examples.(7-1-26)

028.HOTELS, MOTELS, LODGING, AND CAMPGROUNDS. 63-1801 through 63-1804, 63 -3612(2), 67-4718, 67-4917B, 67-4917C, Idaho Code

01.Fees. Fees charged for providing hotel, motel, lodging, short-term rentals, vacation rentals, and campground accommodations are subject to state sales tax, Idaho Travel and Convention tax, and may be subject to the Auditorium or Community Center District sales tax. This includes fees collected for short-term rentals and vacation rentals even when the sale is facilitated by a short-term rental marketplace. These taxes are explained in IDAPA 35.01.06.(7-1-26)

02.Resale Purchases. Hotels, motels, lodging operators, short-term rentals, vacation rentals, and campgrounds may purchase tangible personal property for consumption by their customers without paying tax if the tangible personal property is included in the fee charged to the customer and is directly consumed by the customer in such a way that it cannot be reused. Items include:(7-1-26)

a.Facial tissue, toilet tissue, disposable laundry pickup bags, and paper napkins.(3-31-22)

b.Soaps, hair shampoo, hair conditioners, and lotions.(3-31-22)

c.Disposable plastic drinking glasses, disposable plastic utensils, disposable shoeshine cloths, and disposable shower caps.(3-31-22)

d.Candies, beverages, meals, and newspapers furnished with the room.(3-31-22)

e.Room stationery, envelopes, notepads, pens, and matches.(7-1-26)

03.Taxable Purchases. Tangible personal property which isn’t included in the fee charged to the customer and not directly consumed by the customer is taxable when purchased by the hotel, motel, lodging operator, short-term rental, vacation rental, or campground. Taxable purchases include property not directly consumed by the customer, property that isn’t disposable in nature, or property that is depreciated in the books and records of the hotel, motel, lodging operator, short-term rental, vacation rental, or campground. The hotel, motel, lodging operator, shortterm rental, vacation rental, or campground is the user and consumer of such supplies and equipment and will pay sales tax on the purchase of such items. Items include:(7-1-26)

a.Bath towels, bathmats, linens, and bedding.(3-31-22)

b.Glassware, silverware, and dishware.(7-1-26)

c.Furniture and fixtures.(3-31-22)

d.Bibles, room service menus, and directories.(3-31-22)

e.Garbage can liners.(3-31-22)

f.Any tangible personal property available to the general public.(3-31-22)

IDAPA 35.01.02.029 Producing, Fabricating, and Processing

01.In General. Tax applies to charges for materials and labor used in producing, fabricating, processing, printing, imprinting, or the engraving of tangible personal property. Producing, fabricating, and processing include any operation which results in the creation or production of tangible personal property. The operation can be a step or a series of steps in a process that will ultimately result in the creation or production of tangible personal property. (7-1-26)

02.Repairing and Reconditioning. Producing, fabricating, processing, or engraving doesn’t include labor performed to repair, recondition, refit, or refurbish tangible personal property for the use for which it was originally produced. Labor to fabricate tangible personal property that is then used in a repair is taxable. See Section

IDAPA 35.01.02.062 (7-1-26)

030.ADMISSIONS. 3612, Idaho Code

01.Admissions. Charges for admission to a place or event in Idaho include the right to remain in a place or use a seat or table or other similar accommodation and are taxable. The charge to gain access to a place or event is taxable whether that charge is designated as a cover charge, minimum charge or any such similar charge.

a.When charges for admission allow access to a place or event for a limited period, any additional charge to extend that time is admission and is taxable.(3-31-22)

b.When a person or organization acquires the sole right to use any place or the right to dispose of or control the admissions to any place with the intent of charging people to attend the event, the amount paid for such right isn’t subject to sales tax. Such a transaction constitutes a rental for resale. However, when the person or organization sells admission, the tax will apply to the amounts paid for such admission. If the person or organization doesn’t charge people to attend the event, their rental of the recreational facility may be taxable. See Section 129.

02.Rental of Tangible Personal Property. When a charge is made only for the rental of tangible personal property such as skates, golf clubs, etc., the rental will be taxable. If a lesser charge is made to a person not desiring to use the property or services offered, this lesser amount will be deemed to represent the amount charged for admission.(3-31-22)

IDAPA 35.01.02.031 Radio and Telecommunications Equipment and Land Mobile Radio Service

OF SYSTEMS. -3612, 63-3621, Idaho Code

01.General Rule and Scope. This section describes sales and use tax treatment of telephone terminal equipment or services and land mobile radio systems or services.(7-1-26)

02.Telephone Terminal Equipment and Services.(3-31-22)

a.The sale, rental, or lease of telephone terminal equipment is taxable. Telephone terminal equipment includes desk sets, PBX systems, automated answering equipment, cellular telephones, and mobile radio telephones.

b.Fees for access charges, toll charges, call waiting, call forward, message recording, and similar charges to customers aren’t taxable.(7-1-26)

03.Land Mobile Radio Systems or Services. Land mobile radio systems and services, defined by 47 CFR § 90.7, are a regularly interacting group of base, mobile and associated control and fixed relay stations intended to provide land mobile radio communications service over a single area of operation.(3-31-22)

a.The sale, rental, or lease of terminal equipment or equipment located on the customer’s premises is taxable. The equipment includes handsets, mobile telephones, antennae, and like or similar property.(3-31-22)

b.Separately stated fees for the installation of terminal equipment or equipment that will be located on the customer’s premises aren’t taxable.(7-1-26)

c.Separately stated fees for access charges, toll charges, and similar charges are not taxable.

04.Provider Equipment. The owner or provider of telephone or land mobile radio systems and services will pay a sales or use tax on any tangible personal property purchased for the use of the business. This includes equipment used in receiving or transmitting office supplies, repair equipment, accounting or customer billing equipment, and equipment or devices or other property used to maintain or repair land mobile radio systems or services. Equipment referenced in Subsection 031.02.a. isn’t provider equipment.(7-1-26)

05.Drop-In Equipment and Inside Wiring. The installation of drop-in equipment and inside wiring to bring communication transmissions from a source outside the premises of the user to terminal equipment within the user’s premises is an improvement to real property. Drop-in equipment and inside wiring include wires, plugs, sockets, receptacles, connectors and similar items. See Section 012 for tax treatment of contractors.(7-1-26)

IDAPA 35.01.02.032 (Reserved)

033.SALES AND FREE DISTRIBUTION OF NEWSPAPERS AND MAGAZINES. -3610, 63-3612, 63-3613, 63-3619, 63-3622, 63-3622T, Idaho Code

01.Subscriptions. Subscriptions to printed newspapers and magazines are sales of tangible personal property.(7-1-26)

02.Single Copy Price. The single copy price is to be computed according to the following formula.

(Published subscription price) x (Number of subscription periods in one (1) year) / (Number of issues a subscriber receives in one (1) year) = Single Copy Price.(7-1-26)

03.Subscription Price. As used in this rule, the terms published subscription price and subscription price mean the total amount charged for purchase and delivery of the newspaper and magazine, except that separately stated postage is to be excluded from the taxable subscription price. It is acceptable business practice for publishers to establish a price for their newspapers as separate weekday-only and Sunday-only issues. The provisions of this rule will be in effect in such cases. When the price is posted as a combined weekday-Sunday price, sales tax will be charged on the combined subscription price.(3-31-22)

04.Vending Machine Sales. Sales of newspapers or magazines through a vending machine are taxed computed on the retail sales price otherwise directed in Idaho Code.(7-1-26)

05.Product Consumed by the Publisher. Eight-tenths of one percent (0.8%) of net press run of newspapers or magazines, will be taxed as product consumed by the publisher. Any percentage figure below eighttenths of one percent (0.8%) is to be supported by accepted accounting methods generally used in the publishing industry. The value of the newspapers used is set at the retail price charged to the consumer. Formula: (Eight tenths of one percent (0.8%) of Daily Net Press Run) x (Single Copy Retail Price) x (Tax Rate) / Daily Net Press Run = Tax Per Copy.(7-1-26)

06.Single Unit Price and Net Press Run. For purposes of this calculation, single copy price is the amount calculated by the formula in Subsection 033.02. Net press run is all readable, usable copies, including editorial copies, tearsheets, and archival copies, and excluding spoiled runs or printing waste.(7-1-26)

07.Free Distribution Newspapers.(7-1-26)

a.Newspaper Format. The term “newspaper format” means a publication bearing a title, issued regularly at stated intervals of at least twelve (12) times a year, and formed of printed paper sheets without binding.

Catalogs, advertising fliers, travel brochures, employee newsletters, theater programs, telephone directories, restaurant guides, posters, and similar publications are not publications in newspaper format.(7-1-26)

b.Qualifying for Exemption. Advertisements promoting the free distribution newspaper itself don’t qualify as non-income producing informative material. Neither do logos, column headings, mastheads, borders, etc.

IDAPA 35.01.02.034 (Reserved)

IDAPA 35.01.02.035 Layaway Sales

01.In General. Sales tax will be collected on the total sales price of the items on layaway when the customer takes possession of the merchandise. The sales tax is accrued and remitted to the state based on the tax rate in effect at the time of sale. Separately stated non-refundable layaway service charges are not taxable.(7-1-26)

036.SIGNS. -3609, 63-3612, 63-3613, 63-3622, Idaho Code

01.Lease or Rental of Signs. The lease or rental of signs that are tangible personal property is taxable.

02.Material That Becomes Part of a Sign. The sale of advertising signs may consist of a mixed transaction including both a sale of tangible personal property and a sale of real property.(3-31-22)

a.The materials and labor necessary to fabricate a sign are taxable unless an exemption applies.

b.Signs may be attached to real property in such a way that they become a real property improvement. The person installing materials into real property is a contractor and is the consumer of the materials installed. See Section 012.(7-1-26)

03.Road Signs. Road signs include traffic signs such as speed limit, stop; street, recreational area, mileage, exit, and other informational signs.(7-1-26)

a.In general, road signs become real property upon installation. A contractor installing road signs is improving real property when performing the installation work. The contractor is the consumer of all materials used in the installation of the road sign. The contractor owes sales or use tax on its use of all sign materials regardless of whether the contractor purchased the materials or had the sign materials provided by the sign owner. However, if the sign owner has already paid sales or use tax on its purchase of the sign materials, the contractor won’t owe any additional use tax.(7-1-26)

b.If a road sign is intended to be temporary, the road sign doesn’t become real property regardless of how the road sign is affixed to real property.(7-1-26)

04.Displays, Graphics, or Signs Applied to Real Property. Custom displays, graphics, or signs applied to walls or windows of a building isn’t a retail sale of tangible personal property and isn’t taxable. The applicator pays sales or use tax on the purchases of materials used.(7-1-26)

05.Billboards. Billboards are not in the same category as signs. The rental of a billboard isn’t a rental of tangible personal property. Materials used in the construction, erection, and maintenance of a billboard are taxable.

IDAPA 35.01.02.037 Aircraft and Flying Services

Sections 21-101, 63-3612, 63-3622GG, Idaho Code

01.Definitions. For the purposes of this section, the following terms have the following meanings:

a.Aircraft. The term aircraft is defined in Section 21-101(b), Idaho Code.(7-1-26)

b.Freight. Goods transported by a carrier between two (2) points.(7-1-26)

c.Nonresident Businesses and Other Organizations. A limited liability company (LLC) or other legal entity formed by an Idaho resident under the laws of another state primarily for the purpose of purchasing and owning one (1) or more aircraft isn’t a nonresident. The use of an aircraft owned by such an entity will be subject to use tax upon its first use in Idaho.(7-1-26)

d.Day. Any part of a 24-hour period from midnight to midnight is a day.(7-1-26)

e.Transportation of passengers or freight for hire. The business of transporting persons or property for compensation from one (1) location on the ground or water to another. It doesn’t include any flight that begins and ends at the same point.(7-1-26)

f.Common Carrier. The operation of an aircraft in the transportation of passengers or freight for hire by members of the public. For flights in which federal regulations limit or minimize profit, the aircraft is likely not operating as a common carrier. The term “public” doesn’t include:(7-1-26)

i.Owners or operators of the aircraft;(3-31-22)

ii.Employees of the aircraft owner or operator;(3-31-22)

iii.Guests of the aircraft owner or operator;(3-31-22)

iv.Any of the above with the same relationship to a parent of the aircraft owner, a subsidiary of that parent, or a subsidiary of the aircraft owner;(3-31-22)

v.An individual or entity flying under a time sharing agreement which is an arrangement where an aircraft owner leases their aircraft with flight crew to another individual or entity and the aircraft owner limits the amount charged in accordance with federal regulations; or(7-1-26)

vi.An individual or entity flying under an interchange agreement which is an arrangement where an aircraft owner leases their aircraft to another aircraft owner in exchange for equal time on the other owner’s aircraft and any fees charged can’t exceed the difference between the costs of owning, operating, and maintaining the two (2) aircraft.(7-1-26)

02.Aerial Contracting Services. Businesses primarily engaged activities involving the carrying of external loads, such as aerial logging, are performing aerial contracting services. Such businesses are not primarily engaged in the transportation of freight.(7-1-26)

a.Aircraft purchased, rented, or leased for aerial contracting are taxable unless an exemption applies.

It makes no difference if the service is provided to a government agency or a private individual or company. The purchase of repair parts, oil, and other tangible personal property are taxable.(7-1-26)

03.Flying Instructions. Flying instructions or lessons which may include solo flights are a service and the fees are not taxable.(3-31-22)

a.Aircraft purchased, rented, or leased to be used primarily for flying instruction are taxable.

b.When aircraft held for resale are used by the aircraft dealer for flying instructions or lessons, a taxable use occurs. The use tax is due on a reasonable rental value for the time the aircraft is used to provide the service.(3-31-22)

038.FLYING CLUBS (RULE 038). -3612, 63-3613, 63-3620, Idaho Code

01.In General. A flying club is an association of persons who have purchased or leased aircraft for the purpose of renting the aircraft to club members. The aircraft rentals to the club members are considered bare equipment rentals and are taxable at a reasonable rental value.(3-31-22)

02.Rental or Sale of Aircraft to Members. The flying club is a retailer who is obligated to obtain a seller’s permit and collect and remit sales tax. See Section 024.(7-1-26)

03.Other Charges to Members. Charges for membership fees are generally taxable. If the membership fee is not related to the rental of the aircraft, the fee isn’t taxable. Separately stated charges for flight instruction aren’t taxable. However, charges for logbooks, flight instruction manuals, or other tangible personal property are taxable.(7-1-26)

04.Aircraft Repair Parts. If the flying club is responsible for the maintenance of the aircraft, the club may purchase the necessary repair and replacement parts without paying tax.(7-1-26)

IDAPA 35.01.02.039 (Reserved)

IDAPA 35.01.02.040 Professional Taxidermy

01.In General. Taxidermy is subject to Idaho sales and use tax. When selling an item fabricated from a hide, fur pelt, or other animal material the entire sales price is taxable even if the customer supplies the raw materials. See Section 029.(7-1-26)

02.Materials. Items such as mounting material, tanning products and preservatives, and other materials incorporated into the finished product may be purchased for resale by the taxidermist.(7-1-26)

IDAPA 35.01.02.041 Food, Meals, or Drinks

Sections 63-3607, 63-3612(2)

(b), 63-3621(16), 63-3622J, Idaho Code

01.In General. This section covers the imposition of tax on sales of food, meals, or drinks.(7-1-26)

02.Clubs and Organizations. Private clubs, country clubs, athletic clubs, fraternal, and other similar organizations are retailers of tangible personal property sold by them, even if they make sales only to members. Such organizations are to collect and remit Idaho sales tax on all taxable sales. Taxability of membership dues depends upon what is provided as a part of the membership dues.(7-1-26)

a.When an organization holds a function in its own quarters, maintains its own kitchen facilities, and sells tickets which include items such as meals, dancing, drinks, entertainment, speakers, and registration fees (convention), the charges may be separated and tax collected on meals, drinks, and admission fees when the ticket is sold. The organization holding the function or convention is obligated to collect and remit Idaho sales tax.(7-1-26)

b.When an organization holds a function in facilities operated by a restaurant or motel and sells tickets for meals, drinks, and other services, no sales tax applies to these sales if the organization pays the restaurant or hotel sales tax on the meals and drinks furnished and all other services performed. The hotel, restaurant, or caterer will collect and remit the tax to the state.(3-31-22)

03.Colleges, Universities, and Schools. A cafeteria operated by a state university, junior college district, public school district, or any other public body is treated the same as a cafeteria operated by a private enterprise. Purchases of food for resale are not taxable; meals sold are taxable.(3-31-22)

a.If a meal is paid for by cash or a meal ticket is sold to the student, tax is computed on the total sales price of the meal. If meals are sold as part of a room and board fee, the amount paid for board is separated from the amount paid for the room. Tax is calculated and collected on that part of the total fee allocated to the purchase of meals.(3-31-22)

04.Fraternities, Sororities, and Cooperative Living Group. Fraternities and sororities generally purchase and prepare food for their own consumption. The food is prepared and served in a cooperative manner by members of the fraternity or by employees hired by the group for this purpose. Purchases made by the fraternity or sorority are for consumptive use and are taxable. There is no sale of meals to fraternity or sorority members and no sales tax imposed on any allocated charge for them whether stated separately or included as part of a lump sum charge for board and room.(3-31-22)

a.If a concessionaire is retained by the fraternity or sorority to furnish meals, the concessionaire is a retailer engaged in the business of selling meals; food purchases are for resale and meals supplied by the concessionaire to members of the fraternity or sorority are taxable.(3-31-22)

b.If the fraternity or sorority regularly furnishes meals for a consideration to nonmembers, these meals become taxable and the fraternity or sorority is to obtain an Idaho seller’s permit.(3-31-22)

c.Cooperative living groups are normally managed in much the same manner as fraternities and sororities. Food is purchased and meals are prepared and served by members of the group or their employees. The same conditions outlined above for fraternities and sororities apply to cooperative living groups.(3-31-22)

05.Boarding Houses. Sales of meals furnished by boarding houses are taxable, when they are charged separately. This applies even if the meals are served exclusively to regular boarders. Where no separate charge or specific amount is paid for meals furnished, but is included in the regular board and room charges, the boarding house or other place isn’t considered to be selling meals, but is the consumer of the items used in preparing such meals.

06.Honor System Snack Sales. Honor system snack sales are those items of individually sized prepackaged snack foods, such as candy, gum, chips, cookies or crackers, which customers may purchase by depositing the purchase price into a collection receptacle. Displays containing these snacks are generally placed in work or office areas and are unattended. Customers are on their honor to pay the posted price for the article removed from the display. Purchases from these snack displays are taxable.(3-31-22)

a.Sales tax applies to the total sales. The posted price is to include a statement that sales tax is included.(3-31-22)

b.The formula for computing the taxable amount is: total sales/ (100% + tax rate).(7-1-26)

07.Church Organizations. Special provisions apply to religious organizations. See Section 63-3622J, Idaho Code.(7-1-26)

08.Food or Beverage Tastings. If a participant pays to participate in a food or beverage tasting, the charge to participate in the tasting is taxable.(7-1-26)

09.Nontaxable Purchases by Establishments Selling Meals or Beverages. Persons who serve food, meals, or drinks for a consideration may purchase tangible personal property without paying tax if the property is for resale to their customers, is included in the fee charged to the customer, and is directly consumed by the customer in such a way that it cannot be reused. Items which are purchased for resale and directly consumed by customers include:(7-1-26)

a.Disposable containers for food or drinks.(7-1-26)

b.Disposable supplies included in the price of the meal or drink, such as drinking straws, stir sticks, utensils, paper napkins, paper placemats, and toothpicks.(7-1-26)

c.Candies, popcorn, drinks, or food, when included in the consideration paid for other food, meals, or drinks.(3-31-22)

10.Taxable Purchases by Establishments Selling Meals or Beverages. Tangible personal property which isn’t included in the fee charged to the customer and not directly consumed by the customer is taxable when purchased by the restaurant, bar, food server, or similar establishment. Tangible personal property which isn’t directly consumed by the customer includes property that is reusable or property that is depreciated in the books and records of t he restaurant, bar, or similar establishment. Taxable purchases include:(7-1-26)

a.Waxed paper, stretch wrap, foils, paper towels, garbage can liners, or other paper products consumed by the retailer, as well as linens, silverware, glassware, tablecloths, towels, and reusable napkins, furniture, fixtures, cookware, and menus.(7-1-26)

b.Any tangible personal property available to the general public, such as restroom supplies and matches.(3-31-22)

11.Examples. Available at Sales and Use Tax Examples.(7-1-26)

042.PRICE AND PRODUCT LABELS. -3612 and 63-3613, Idaho Code

01.Price Labels. Price labels, stickers, pricing ink, pricing guns and shelf labels purchased by retailers are property used and consumed by the retailer in the regular course of business and are taxable.(7-1-26)

02.Product Labels. Product labels that contain product information such as ingredients, nutritional information, or caloric information are not taxable, since the utility of the label doesn’t end with the purchase of the product. Product labels that don’t have ingredients, nutritional, or caloric information, such as freshness or promotional labels, are taxable as advertising and are property used and consumed by the retailer.(7-1-26)

043.SALES PRICE OR PURCHASE PRICE DEFINED. -3612 and 63-3613, Idaho Code

01.Sales Price and Purchase Price. The terms sales price and purchase price may be used interchangeably. Both mean the price paid by the customer to the seller.(7-1-26)

02.Services Agreed to Be Rendered as a Part of the Sale. The taxable sales price includes services agreed to be rendered as a part of the sale. The following isn’t an exclusive list:(7-1-26)

a.Any charges for any services to bring the subject of a sale to its finished state ready for delivery and in the condition specified by the buyer, including charges for assembly, fabrication, alteration, lubrication, engraving, monogramming, cleaning, or any other servicing, customizing or dealer preparation except those exempted in Section 63-3622OO, Idaho Code.(3-31-22)

b.Any charges for warranties, service agreements, insurance coverage, or other services mandated by the vendor to be taken as a condition of the sale. If the sale could be completed without the payment of these charges, the charges are not part of the taxable sales price if separately stated. See Section 049.(7-1-26)

03.Costs of Business. Costs passed along by the seller to their customer don’t reduce the taxable sales price. The following isn’t an exclusive list:(7-1-26)

a.Any commission or other form of compensation for the services of an agent, auctioneer, consultant, broker, or similar person.(7-1-26)

b.Any fuel surcharges except those charges which the vendor can document are related only to delivery of the property to the end customer.(7-1-26)

c.Any convenience, surcharge, processing, or other fee imposed by a seller on a buyer paying with a financial transaction card such as a credit card, debit card, check card, or other banking instrument or device.

04.Added Charges. Charges added by the seller to the sales price are taxable unless excluded by statute. The following isn’t an exclusive list of taxable charges:(7-1-26)

a.Any charge based on the amount or frequency of a purchase, such as a small order charge or the nature of the item sold, such as a slow-moving charge for an item not frequently sold.(7-1-26)

b.Any amounts designated as service charges, including those added to the price of meals, drinks, delivery charges, or admission charges.(7-1-26)

c.Charges added to the price due to a surge in demand or during a particular time frame.(7-1-26)

044.TRADE-IN AND TRADE-DOWN. -3612, 63-3613, 63-3621, Idaho Code

01.Trade-In. A trade-in is the amount allowed by a retailer on merchandise accepted as payment for other merchandise. Merchandise is tangible personal property which is, or becomes, part of an inventory held for resale.(7-1-26)

02.Trade-Down. A trade-down is a transaction in which a vendor accepts a trade-in from the customer that equals or exceeds the value of the merchandise sold to the customer. The taxable sales price is reduced to zero (0) and no sales tax is due on the transaction.(7-1-26)

03.Trade Allowance. When a retailer sells merchandise from their resale inventory and lets the customer trade other goods which the retailer places in their resale inventory, the taxable sales price of the merchandise may be reduced by the amount allowed as trade. A trade allowance will qualify if the property traded meets the following criteria:(7-1-26)

a.The property is consideration delivered by the buyer to the seller;(3-31-22)

b.The sales documents, executed not later than the time of sale, identify both the property being purchased and the property being traded; and (7-1-26)

c.The delivery of the trade and the purchase are components of a single transaction.(7-1-26)

d.The buyer is an owner of the property being traded.(7-1-26)

04.Disallowed Trade Allowance.(7-1-26)

a.Private Party Transactions. A trade allowance isn’t allowed on transactions between individuals because the traded property doesn’t become a part of an inventory held for resale.(7-1-26)

b.Insurance Settlements. An insurance settlement doesn’t qualify as a trade allowance.(7-1-26)

05.Core Charges. Parts for cars, trucks, and other types of equipment are often sold with an added core charge. When the used core is returned, the core charge is refunded. This is essentially a trade-in of a used part for a new part. Since the seller cannot be certain that the customer will return a reusable core, such core charges are taxable. The tax on the core charge will be refunded by the seller at the time credit for the core charge is allowed.

06.Trade-In for Rental/Lease Property. When tangible personal property is traded in as partial payment for the rental or lease of other tangible personal property, sales tax applies to all payments made after the value of the trade-in property has been depleted and the lessor begins charging for the lease or rental. The methods of applying the trade-in value to the lease are:(7-1-26)

a.The trade-in value may be subtracted from the value of the leased or rented property, thereby reducing the monthly payments and the sales tax due on those payments.(3-31-22)

b.The trade-in value may be subtracted from the initial lease payments, with no sales tax due on those payments until it is used up.(3-31-22)

c.A combination of the two (2) methods, above.(3-31-22)

07.Rental/Lease Property Traded-In. When a person disposes of tangible personal property that is leased and assigns his right to purchase the leased property to the retailer, no trade-in allowance is given for the amount of the residual buyout paid by the retailer. However, if the residual buyout amount which the lessee would pay to purchase the property is less than the amount that would be allowed by the retailer as a trade-in if the lessee had actually owned the vehicle, then the taxable sales price may be reduced by the difference between the total tradein amount and residual buyout.(3-31-22)

IDAPA 35.01.02.045 Rescinded Sale, Refunds of Purchase Price

Sections 28 -2-608, 63-3612, 63-3613, Idaho Code

01.A Rescinded Sale. A transaction in which the seller and buyer place each other in the same positions they were in prior to entering into any taxable transaction; and a transaction which meets the rules of the Uniform Commercial Code for revoking acceptance in whole or in part.(7-1-26)

02.Refund of Remitted Sales Tax. Where a seller has collected and remitted tax on the sale and has refunded it to the buyer on rescission, the Commission will refund or credit the seller accordingly. The burden of proving a rescission is on the person claiming the refund or credit on a rescinded sale. See Section 117.(7-1-26)

03.Refund Reduced. The sales tax refunded to the buyer is reduced by the amount of sales tax due on the seller added charges to recover depreciation, buyer usage, or other costs on the customer return.(7-1-26)

04.Restocking Charge. If a seller places a restocking charge on returned merchandise, the charge isn’t taxable, and the sales tax refunded to the buyer in not reduced.(7-1-26)

05.Optional Warranty and Other Contracts. Payment of the purchase price to the buyer pursuant to an optional warranty or contract between the seller and the buyer doesn’t constitute a rescission of the sale or refund.

06.Documentation. To obtain refund credit, the seller will keep adequate documents to support their claim for refund or adjustment.(7-1-26)

046.COATINGS ON TANGIBLE PERSONAL PROPERTY. -3612, 63-3613, 63-3622OO, Idaho Code

01.Coatings Generally. A coating is a substance covering the surface of tangible personal property usually intended to improve the durability or aesthetic appeal of the tangible personal property to which it is applied.

There are a variety of coatings including paint, powder coating, chrome plating, spray-on bedliners, and anodized coatings. This section doesn’t apply to coatings applied directly to real property.(7-1-26)

02.Coatings are Tangible Personal Property. The materials applied to tangible personal property to produce a coating are tangible personal property both before and after the application process. Unless an exemption applies, the sale of a coating is taxable.(7-1-26)

03.Material Charges. Unless an exemption applies, the materials portion of a sale of a coating is taxable. If the seller is unable to measure the exact amount of material used, a reasonable method of estimation is acceptable.(3-31-22)

04.Nontaxable Labor Charges. In any of the following circumstances, the labor to apply a coating will be nontaxable labor:(3-31-22)

a.A previous coating is removed and replaced with a new coating, regardless of any differences in quality between the two (2) coatings.(3-31-22)

b.A coating is applied to used tangible personal property on top of an already existing coating.

05.Taxable Labor Charges. In any of the following circumstances, the labor to apply a coating will be taxable labor:(3-31-22)

a.A coating is applied to new tangible personal property, regardless of whether the tangible personal property already has a coating except those exempted in Section 63-3622OO, Idaho Code.(3-31-22)

b.A coating is applied to new or used tangible personal property that has never been previously coated.(3-31-22)

06.Separate Statement. When the labor portion of the transaction is exempt, both materials and labor are to be separately stated on the customer’s billing statement. If there is no separate statement of materials and labor, the entire transaction is taxable.(7-1-26)

07.Used Tangible Personal Property. For purposes of this section, tangible personal property is used if the tangible personal property has been previously put to the use for which it was intended. If a contractor hires someone to apply a coating to tangible personal property that the contractor intends to incorporate into real property, the tangible personal property has not been put to the use for which it was intended and is considered new tangible personal property.(7-1-26)

08.Tangible Personal Property Held for Resale. For new or used tangible personal property held by a seller as part of its inventory, any labor costs incurred to apply a coating to the tangible personal property and charged to the end consumer are taxable services agreed to be rendered as part of the sale of the tangible personal property. The labor charges are exempt only if the sale of the tangible personal property is exempt or if the labor is exempted by Section 63-3622OO, Idaho Code. If the seller pays a third party to apply a coating to tangible personal property in its inventory, the seller may claim a resale exemption on the transaction.(3-31-22)

09.Exemptions. Like any sale of tangible personal property, if the customer provides a properly executed exemption certificate to the seller claiming an exemption that applies to the transaction, the seller has no obligation to collect sales tax on the transaction. The seller maintains a copy of the exemption certificate on file.

10.Examples. Available at Sales and Use Tax Examples.(7-1-26)

IDAPA 35.01.02.047 Outfitters, Guides, and Like Operations

01.In General. Fees charged for services performed by outfitters, guides, dude ranches, hunting and fishing lodges, or camps are charges for the use of, or privilege of using, tangible personal property or other facilities for recreation. Fees charged by outfitters and like operations for providing outdoor recreational services are taxable.

a.An outfitter is any person that is for hire to conduct outdoor recreational activities, including: hunting animals or birds; float or power boating of rivers, lakes, and streams; fishing; hiking; skiing; hazardous desert or mountain excursions; and other recreational activities.(7-1-26)

b.A guide is a person employed by an outfitter to furnish personal services for the conduct of outdoor recreational activities.(3-31-22)

02.Services Performed in More Than One State. When an outfitter’s service to a client takes place in more than one (1) state, and the customer receives an invoice from the outfitter that separately displays the Idaho portion of the charges from those of the other states, only the Idaho portion is subject to Idaho sales tax.(3-31-22)

a.When an outfitter’s service to a client takes place in more than one (1) state and the outfitter fails to separately state the Idaho portion of the charges from those of other states, sales tax will be charged on the total amount.(7-1-26)

03.Government Use Fee. Land and water use fees imposed on outfitters, such as the three percent (3%) fee paid to the U.S. Forest Service, are not taxable when separately stated on the customer’s invoice. (3-31-22)

04.Prepaid Travel Expense. When an outfitter’s invoice separately states prepaid travel expenses such as lodging, and the outfitter has paid sales tax to vendors providing the travel services, the outfitter won’t be obligated to tax that portion of their bill to the customer.(7-1-26)

05.Lodging. If an outfitter provides overnight lodging for a client at a facility operated by the outfitter, charges for the lodging are taxable and hotel/motel taxes as provided by IDAPA 35.01.06, Section 011.(7-1-26)

06.Equipment Rental. When an outfitter rents equipment such as ground sheets, sleeping bags, rain gear, boots and dry bags, to his client for use during the recreational activity, sales tax will be charged on the equipment rental.(7-1-26)

07.Prepurchase Hunting and Fishing Licenses. When an outfitter purchases a hunting or fishing license for a client and separately states the fee on the billing to the client, no sales tax applies to the license fee.

08.Travel Agency Services.(3-31-22)

a.When outfitter services are purchased by a client through a travel agency and the outfitter bills the travel agency for the fee, the amount billed to the travel agency is taxable. In this case, the agency is acting as an agent for the client and the additional fee charged by the agency to the client isn’t taxable.(7-1-26)

b.When outfitter services are arranged for a client by a travel agency but the outfitter bills the client, the amount billed to the client is taxable. In this case, the agency is acting as the agent of the outfitter and the fee paid to the travel agency by the outfitter cannot be deducted from the measure of the taxable sale. Even if the outfitter separately states the travel agency fee on their billing to the client, they are obligated to charge tax on the total amount.(7-1-26)

c.When a primary outfitter books a client and hires a secondary outfitter to provide the services to the client, the primary outfitter is obligated to charge the client sales tax on the full fee.(7-1-26)

09.Purchases by Outfitters and Like Operations.(3-31-22)

a.Outfitters will pay tax when purchasing equipment and supplies for use in their business. Purchases such as boats, rafts, oars, motors, horses, tack, llamas, transportation equipment, camp gear, cooking gear, animal feed, brochures, and promotional give-away items.(7-1-26)

b.When an outfitter maintains an inventory of gear, such as ground sheets, sleeping bags, boots, rain gear, and dry bags, which is exclusively held for rental to clients, the outfitter may purchase the gear without tax in the manner previously described. The outfitter may purchase gear without paying tax only if the gear is rented to clients as a separate line item on the invoice to the client and sales tax is charged to the client. If gear is provided to clients as a part of the outfitter package fee, the outfitter will pay tax when purchasing the gear.(7-1-26)

c.When an outfitter arranges travel accommodation for their client and pays the vendors of lodging, and restaurant or catered meals, they will pay sales tax, as well as other applicable hotel/motel taxes, to the vendors.

When an outfitter purchases food that he will prepare and furnish to clients, no sales tax applies if the outfitter provides a resale certificate. The outfitter will then collect a tax from his client on the sale of the furnished food.

Alternatively, an outfitter may buy food and pay tax on the purchase. Under this alternative, the outfitter will include the cost of the food in his nontaxable charges to his client.(7-1-26)

d.When an outfitter purchases the services of a taxidermist on behalf of his client, they should not pay tax to the vendor by providing the vendor with a properly completed resale certificate. The outfitter will charge tax to his client on this fee.(7-1-26)

11.Federal Preemption. The National Maritime Transportation Security Act of 2002, forbids the states from imposing tax on any vessel or other water craft, or its passengers or crew if the vessel or water craft is operating on any navigable waters. The Tax Commission interprets this statute to mean that states are forbidden from taxi ng sales of rafting and jet boating trips if they occur on navigable waters. See 33 U.S.C. Section 5. If Congress repeals the preemption sales of rafting trips will become taxable on the effective date of the repeal. This interpretation is subject to judicial review and could change, depending on rulings from state or federal courts.(7-1-26)

IDAPA 35.01.02.048 Manufactured Homes (mobile Homes) and Modular Buildings

Sections 39 -4105, 39-4301, 63-3605J, 63-3606, 63-3612, 63-3613, 63-3621, Idaho Code

01.Used Manufactured Home. Only the sale of a new manufactured home is taxable. After the first sale at retail of a manufactured home, any subsequent retail sale of the unit is a sale of a used manufactured home.

The sale of a used manufactured home is exempt from tax, whether or not the original sale was taxable and without regard to whether the sale is made for use within or without Idaho or whether sold by a dealer. A dealer who sells both new and used manufactured homes is to maintain adequate records to establish which sales are taxable and which are exempt for sales tax audit purposes.(3-31-22)

02.Sale of an Office Trailer. An office trailer is a structure which is built on a permanent chassis, is transportable in one (1) or more sections and is designed for use as an office. An office trailer doesn’t qualify as a manufactured home, because it isn’t designed for use as a dwelling, nor does it qualify as a modular building, because it isn’t designed to be affixed to real property. When an office trailer is sold at retail, it is taxed on one hundred percent (100%) of the purchase price, including all furniture, fixtures, and appliances, whether the office trailer is new or used.(7-1-26)

03.Component Parts. Component parts include items incorporated by the manufacturer which remain unchanged at the time of the original retail sale, such as sinks, cabinetry, closet doors, central heating and cooling, garbage disposals, water heaters, and carpeting. Refrigerators, ranges, draperies, and wood burning stoves placed in the unit by the manufacturer are also component parts.(3-31-22)

04.Non-component Parts. All fixtures, furniture, furnishings, appliances, and attachments not incorporated as a component part of a new modular building or manufactured home are taxable separately and distinctly from the sales price of the modular building or manufactured home. Such items are to be separately stated on the sales invoice and tax will be assessed on the separately stated items on their full retail value.(3-31-22)

05.Repairs. Repairs to or renovations of used modular buildings or manufactured homes are repairs to real property, irrespective of whether the unit is affixed to real property or whether the unit is held for resale.

Materials used to repair or renovate a used modular building or manufactured home are taxable at the time of purchase or use tax at the time of use.(3-31-22)

IDAPA 35.01.02.049 Warranties and Service Agreements

01.Warranties and Service Agreements. Warranties or service agreements may be furnished by the manufacturer or seller upon the sale, lease, or rental of tangible personal property by any of the following means:

a.Including the price of the warranty or service agreement as part of the sales, lease, or rental price of the tangible personal property.(3-31-22)

b.Separately stating the price of the warranty or service agreement, but requiring the purchase of the warranty or service agreement as a condition of the sale, lease, or rental of tangible personal property.(3-31-22)

c.Allowing the buyer the option of purchasing a separately stated warranty or service agreement.

02.Separate Optional Contract. Service agreements may also be offered as a separate optional contract on tangible personal property not owned or sold by the seller of the service agreement.(3-31-22)

03.Services Agreed to be Rendered. Services agreed to be rendered as a condition of a warranty or service agreement may be performed by the seller of the warranty or service agreement or by any dealer or repair facility that the seller may appoint to perform the repair or service.(3-31-22)

04.Non-Optional Warranty or Service Agreement. If the warranty or service agreement is mandatory as a condition of the sale, lease, or rental of tangible personal property, the gross sales price is taxable whether or not the charge for the warranty or service agreement is separately stated from the sales price of the tangible personal property.(7-1-26)

a.When parts are replaced by the seller of the warranty or service agreement, no tax is imposed on the purchase of the parts by the seller. The parts replaced are considered to have been taxed at the time the warranty or service agreement was sold.(3-31-22)

b.When a third-party dealer or repair facility performs the repair, the seller of the warranty or service agreement may provide the repairer with a resale certificate.(7-1-26)

05.Optional Warranty or Service Agreement. If the warranty or service agreement is optional to the buyer, no sales tax is charged on the sale of the warranty or service agreement. A taxable transaction occurs when the seller of the warranty or service agreement performs the repair.(3-31-22)

a.If the seller of the warranty or service agreement performs the repair and purchases parts for the repair or uses parts from his inventory, he will pay sales or use tax upon the parts when they are applied by him.

b.When a third-party dealer or repair facility performs the repair and bills the seller of the warranty or service agreement, the third-party dealer or repair facility will separately state and charge sales tax on the parts to the seller of the warranty or service agreement.(3-31-22)

c.The seller of the warranty or service agreement will pay sales or use tax on parts for the repairs, even if the buyer qualifies for any exemption under the Idaho Sales and Use Tax Act or rules.(3-31-22)

06.Parts in Addition to Warranty Fee. Regardless of any of the above, if the seller of the warranty or service agreement bills the purchaser for parts over and above the agreed upon warranty or service agreement fee, sales tax is charged to the purchaser on the sales price of the parts.(7-1-26)

07.Replacement Parts and Maintenance Supplies. As used in this rule, a warranty or service agreement applies to replacement parts and maintenance supplies that become a part of the tangible personal property that is being serviced. The sale of other tangible personal property, such as paper for a copy machine, will be separately stated from any warranty or service agreement fee and sales tax charged to the buyer.(7-1-26)

IDAPA 35.01.02.050 Veterinarians and Veterinary Supplies

Sections 63-3612, 63-3613, 63-3622, 63-3622D, 63-3622N, Idaho Code

01.In General. Fees charged by a veterinarian for professional services are not taxable. Tangible personal property used or consumed by a veterinarian or sold by a veterinarian is subject to sales and use tax.

02.Drugs and Other Supplies. Drugs and other supplies used by a veterinarian while treating animal patients are tangible personal property consumed by the veterinarian while providing services. If the veterinarian has not paid sales tax on the purchase of drugs or supplies, a use tax is owed by the veterinarian.(7-1-26)

03.Services Provided to Exempt Customers. The veterinarian’s use of drugs is taxable even when providing services to an exempt buyer such as a cattle rancher, dairyman, or other producer because the drugs are consumed by the veterinarian. Since the production exemption is available only to the persons engaged in a production business, the veterinarian doesn’t qualify for the exemption.(7-1-26)

04.Retail Sales of Drugs and Supplies. The sale of drugs and veterinary supplies is a retail sale and veterinarians making such sales collect and remit sales tax on those sales. However, the sale of drugs and veterinary supplies to a person operating a stock, dairy, poultry, fish, fur, or other ranch for gain or profit is exempt.(7-1-26)

05.Equipment and Supplies. Tangible personal property purchased or acquired by the veterinarian for the operation of this business including professional instruments and supplies, and office furnishings and equipment are taxable.(7-1-26)

IDAPA 35.01.02.051 Discounts, Coupons, Rebates, and

GIFT CERTIFICATES.

01.Adjustments That Apply After Tax Calculation. Tax will be charged before deducting the following:(7-1-26)

a.Prompt pay discounts. A discount offered by a retailer to a buyer as an inducement for prompt payment. Sales tax will be computed on the full amount of the purchase price before the payment discount is subtracted. When an invoice or other billing document states that a discount will be allowed if payment is made before a certain date, then the discount is presumed to be a prompt pay discount. Discounts allowed on payments received after the stated date are presumed to be prompt pay discounts unless proven to the contrary by clear and convincing evidence.(7-1-26)

b.Manufacturer’s rebates. A manufacturer’s rebate means a cash payment made by a manufacturer to a consumer who has purchased or is purchasing the manufacturer’s product from the retailer. Sales tax is computed on the full amount of the purchase price without regard to the manufacturer’s rebate. Any rebate received by the buyer from the manufacturer, distributor, or any person other than the retailer won’t reduce the retail sales price taxable. Rebates paid by a retailer to the consumer will also be included in the taxable price if the retailer has been reimbursed by a third party, such as the manufacturer.(7-1-26)

c.Manufacturer’s discount. A manufacturer’s discount is a price reduction offered by a manufacturer to a consumer for purchasing their product from a retailer who is then reimbursed that amount by that manufacturer.

Sales tax is computed on the full amount of the purchase price before subtracting the coupon amount. This includes coupons issued by a manufacturer allowing the buyer to buy one item and get a second item free if the retailer will be reimbursed by the manufacturer.(3-31-22)

d.Food Stamps and WIC with a manufacture’s discount. Purchases of food under the Federal Food Stamp Program or the Federal Special Supplemental Food Program for Women, Infants, and Children, (WIC), are exempt from sales or use tax. When a buyer uses manufacturer’s discount coupons to purchase food items that qualify under these programs, the discount value of the coupon is taxable.(7-1-26)

02.Adjustments That Apply Before Tax Calculation. Tax is charged after the deduction of the following:(3-31-22)

a.Trade discounts. A trade discount is a reduction from the posted or listed price offered by a retailer which isn’t an inducement for prompt payment and which, when applied to the posted or listed price, establishes the true selling price to be paid by the buyer.(7-1-26)

b.Retailer’s rebates. A retailer’s rebate is an amount of money or property paid by a retailer to a buyer which is conditioned upon the recipient making a purchase from the retailer. However, if a retailer is reimbursed by a manufacturer or other third party, the transaction isn’t a retailer's rebate and the rebate amount is included in the taxable sales price. This would be the case when a buyer sends the rebate claim to the retailer, the retailer sends the rebate amount to the buyer and the manufacturer reimburses the retailer.(7-1-26)

c.Retailer discount coupons. Retailer discount coupons are coupons issued by a retailer which entitle the holder to purchase the issuing retailer’s products at less than the posted or listed retail price.(3-31-22)

d.Manufacturer’s motor vehicle rebates. Effective July 1, 1990, a manufacturer’s rebate offered to a buyer of a motor vehicle may be deducted from the purchase price of the vehicle before computing the tax if the reba te is used to reduce the retail sales price of the vehicle, or is used as a down payment on the purchase. The dealer’s customer invoice shows the manufacturer rebate as a deduction to, or down payment on, the purchase price of the vehicle. Only manufacturer rebates offered on motor vehicles qualify for the exclusion from tax. Manufacturer rebates offered on trailers, off-highway equipment, and other property will be treated as discussed in Subsection 051.01.b.(7-1-26)

03.Coupon Books.(3-31-22)

a.The sale of a coupon book that contains coupons offering discounts is deemed to be the sale of an intangible and is therefore not taxable.(3-31-22)

b.When the buyer of a coupon book redeems one (1) of the coupons, the discount allowed by the coupon isn’t included in the taxable sales price if the retailer isn’t reimbursed by a manufacturer or other third party.

04.Donated Goods. The donor is the consumer of donated goods and will pay sales or use tax on the purchase price of the goods.(7-1-26)

05.Gift Certificates. A gift certificate purchased from a vendor entitles a recipient to tangible personal property or services when presented to the vendor. The purchase of a gift certificate isn’t a taxable transaction. When the gift certificate is presented for redemption a sale is consummated. If the sale is a transfer of tangible personal property, the vendor collects sales tax at the time of sale. Tax applies to the purchase price of the tangible personal property, irrespective of any cash refunded on any difference between the face value of the gift certificate and the purchase price. If the sale is for services not taxable under the Sales Tax Act, the vendor won’t collect sales tax.

06.Buy One Get One Free Discounts. If a retailer offers a “buy one get one free” discount in which the buyer purchases an item and receives another item of the same kind at no additional charge, the taxable sales price is the actual price paid after the discount is taken. Use tax isn’t applicable to the item sold at no charge; however, if a manufacturer’s discount allows the buyer to receive a free item for which the retailer will be reimbursed by the manufacturer the taxable sales price is the full amount before the discount is calculated.(7-1-26)

07.Complimentary Gift with Purchase of an Item.(3-31-22)

a.If a retailer offers a complimentary item to a customer at the time of, and in connection with, the sale of tangible personal property, the gift is considered a part of the sale. The item given away is deemed to be purchased for resale by the retailer; however, if the sale is of an item exempt from tax and the sale of the gift item would have been taxable, the retailer is responsible for use tax on the gift. This subsection applies only to sales of tangible personal property.(3-31-22)

b.If a retailer offers to give away a promotional item to anyone with no mandatory purchase, then the retailer doesn’t purchase the promotional item for resale. The retailer pays sales or use tax on its purchase price of the promotional items given away.(7-1-26)

c.This subsection applies only to items given away by sellers of tangible personal property. (7-1-26)

IDAPA 35.01.02.052 Purchase and Sale of Tangible Personal Property Relating to Funeral

SERVICES.

Sections 54 -1103, 63-3609, 63-3612, 63-3613, 63-3620, 63-3622, 63-3622U, Idaho Code

01.Purchases by Licensed Funeral Establishments. The exemption doesn’t include sales to and purchases by funeral establishments of equipment and supplies used and consumed while providing funeral services.

The purchase of a memorial marker isn’t an integral part of the funeral service. The purchase of a memorial marker is a taxable transaction regardless of whether it is sold by a licensed funeral establishment. The funeral establishment’s purchase of equipment and supplies used for embalming and preparing bodies for burial and all other tangible personal property used or consumed in the course of the business operations to which title doesn’t pass from the funeral establishment is taxable.(7-1-26)

02.Caskets, Vaults, and Burial Receptacles. Caskets, vaults, and burial receptacles are exempt when sold by a licensed funeral establishment as a part of funeral services and the purchase of these items isn’t taxable. The construction of a building for use as a mausoleum is an improvement to real property and the sale or use of the materials for the construction of the mausoleum is taxed in the same manner as other persons improving real property.

03.Use Tax. When a licensed funeral establishment purchases equipment and supplies from suppliers who don’t collect and remit Idaho sales tax, the funeral establishment will report and remit use tax on their taxable purchases.(7-1-26)

04.Documenting Purchases for Resale. A funeral establishment purchasing tangible personal property for resale will be mandatory to document the purchase for resale by providing their seller with a properly executed resale certificate. The purchase of items like caskets and clothing is a purchase for resale, even though the sale of the same property by the funeral establishment is exempt.(7-1-26)

05.Examples. Available at Sales and Use Tax Examples.(7-1-26)

IDAPA 35.01.02.053 (Reserved)

054.PERSONS ENGAGED IN PRINTING. -3608, 63-3612, 63-3613, 63-3616, 63-3621, 63-3622, 63-3622D, Idaho Code

01.Private Printing Plants. Persons operating private printing plants in conjunction with their principal business pay sales or use tax on the purchase of equipment and supplies used to produce display signs, advertising brochures, and other materials for their own consumption.(3-31-22)

02.Printing upon Special Order. Persons primarily engaged in the printing of tangible personal property upon special order for a consideration may purchase equipment and supplies directly used to produce such property exempt from sales or use tax.(3-31-22)

a.The sale of typography, art work, photoengraving, electros, mats, stereotypes, hand or machine composition, lithographic plates or negatives, electrotypes, etc., to a person primarily engaged in the printing of tangible personal property for a consideration, and to be used directly by such person is deemed essentially sales of service or exempt materials and not taxable.(3-31-22)

b.When purchasing goods for resale, the printer provides the seller with a properly executed resale certificate.(7-1-26)

03.Sales by Persons Engaged in Printing. Fees charged to ultimate consumers for printing of tangible personal property upon special order are taxable.(3-31-22)

a.Printing of tangible personal property includes imprinting and all processes or operations connected with the preparation of paper or paper-like substances, the reproduction thereon of characters or designs and the alteration or modification of such substances by finishing and binding.(3-31-22)

b.Upon such final sales, charges for materials, labor and production of fabrication or typography, author’s alterations, art work, photo engravings, electros, mats, stereotypes, hand or machine composition, lithographic plates or negatives, electrotypes, etc., and binding and finishing services are included in the taxable sales price whether the various charges are separately stated or not.(3-31-22)

c.The following charges, if separately stated, are not included in the taxable sale price:(3-31-22)

i.Charges for postage as part of the printed item; or (3-31-22)

ii.Charges for addressing, stamping, sealing, inserting or wrapping in connection of a direct mail advertising in which items of tangible personal property and service are supplied.(3-31-22)

04.Advertising Inserts. As used in this rule, advertising inserts means printed advertising distributed concurrently with, but printed separately from, a newspaper, magazine, or other publication.(3-31-22)

a.The sale of advertising inserts by a printer or other supplier to an advertiser for use by the advertiser in the promotion of its business or products, and not for resale by the advertiser, is a taxable sale of tangible personal property. If, for any reason, the seller of the advertising inserts fails to collect sales tax on the sale of the advertising inserts to the advertiser, the advertiser is subject to use tax on its use of advertising inserts in Idaho.(3-31-22)

b.When an advertiser contracts for the distribution of advertising inserts to locations within this state, a taxable use by the advertiser occurs. The contracted distribution constitutes an exercise of right or power over the advertising inserts by the advertiser. The person performing the distribution services may be a publisher, printer, distributor of a newspaper, magazines, or other publication, or any other person performing distribution services.

c.A contract between an advertiser and a publisher of a newspaper, magazine, or other publication, whereby the publisher sells advertising space in its publication isn’t a taxable sale.(7-1-26)

05.Labels and Other Printed Matter Sold to Manufacturers. Sales of labels or name plates, and the printing thereon, to manufacturers, producers, or wholesale merchants where the purpose of the buyer is to affix the label or name plate to his own product, or the container thereof won’t be taxable.(7-1-26)

a.Sale of package inserts, individual folding boxes and setup boxes, and the printing thereon to manufacturers, or producers, to accompany their own manufactured products, and to pass to the ultimate consumer upon final sales of the manufactured product contained or described therein, are presumed to be made for the purpose of resale.(3-31-22)

b.Sale of direction sheets, instruction books, or manuals to a manufacturer, producer, wholesale or retail merchant, to be supplied with his product at no separate charge, are not taxable. If a separate charge is made for such sheets, books, manuals, or pamphlets, the manufacturer, etc., is mandatory to collect and remit sales tax.

055.PERSONS ENGAGED IN ADVERTISING. -3612, 63-3613, 63-3621, 63-3622, 63-3622S, Idaho Code

01.In General. Advertising agencies, television stations, radio stations, graphic artists, and other persons engaged in advertising may be engaged in either the rendering of professional services or the sale of tangible personal property or both. When such persons are engaged in the sale of tangible personal property, they are retailers and are to collect and remit sales tax on the property sold. When such persons are engaged in the rendering of professional services, no sales tax applies to the service. Whether the sale is a sale of professional services or of tangible personal property is determined by the object of the transaction, i.e., is the object sought by the buyer the service per se or the tangible personal property produced by the service. Determining whether the sale is a sale of professional services or of tangible personal property is a question of fact is determined in view of all the facts and circumstances of each transaction.(7-1-26)

02.Media Advertising and Advertisements. Media advertising is the use of mass media as a means by which to reach a wide audience, viewers, listeners, or readers, with an advertisement to promote a product, service, issue, or personality. Mass media is defined as radio, television, cable television, newspapers, periodicals, trade journals, or other such media which can reach a mass audience with an identical message. The object sought by the buyer purchasing media advertising is the intangible professional service of the seller. The sale of media advertising is a sale of professional service and is a nontaxable transaction. The transfer of tangible personal property is inconsequential to the services rendered.(7-1-26)

a.Radio and television advertisement. Sales tax doesn’t apply to the amount charged to produce or create advertisements which are to be broadcast by a radio or television station. It makes no difference whether the producer or creator sends the advertisement directly to the broadcast facility or to the advertiser, who in turn distributes the commercial to a broadcast facility.(7-1-26)

b.Radio and television dubs. Charges for dubs which are produced from a master copy of a radio or television commercial or broadcast are not taxable so long as they are for distribution to other broadcasting facilities.

Sales tax will apply to the sale of radio or television commercial or broadcast dubs which are not for distribution to a broadcast facility and are sold to a customer for another use. The measure of the tax will be the total price charged for the copies.(3-31-22)

c.Magazine, newspaper, and periodical advertisements. Sales tax doesn’t apply to the amount charged to a customer to produce camera ready artwork, veloxs, and other forms of artwork which are to be reproduced in and distributed as part of a mass media publication, such as magazines, newspapers, trade journals, and periodicals.

d.Print media advertisement copies. Sales tax will apply to charges for reprints of a print media advertisement sold to a customer. The measure of the tax will be the price charged for the reprints.(3-31-22)

03.Sales of Non-Media Advertising. Non-media advertising is any form of advertising which doesn’t use the mass media in reaching the targeted audience, such as posters, brochures, pamphlets, handbills, displays, business forms, stationery, business cards, key chains, cups and glasses, pens, pencils, t-shirts, and other similar items. The object sought by the buyer is the tangible personal property. If the advertising agency is the agent of its client, the sale is between the supplier of the tangible personal property and the client and is taxable based on the price charged by the supplier to the client. If the advertising agency isn’t the agent of its client, then the purchase from the supplier is for resale. The sale from the agency to its client is a retail sale and is subject to tax based upon the entire amount charged to the customer by the advertising agency, including separately stated fees for:(7-1-26)

a.Artwork produced by the advertising agency, including all materials, design fees, and labor to develop and produce the artwork, lettering, and designs used in the finished non-media advertising.(3-31-22)

b.Artwork, lettering, and designs purchased from a graphic artist.(3-31-22)

c.Photographs, negatives, and other similar items whether purchased from a commercial photographer or produced in-house by the advertising agency.(3-31-22)

d.Professional modeling fees.(3-31-22)

e.Printing charges, whether printed by the advertising agency or a commercial printer, including any markup or service charge.(3-31-22)

f.All other charges to the customer for services agreed to be rendered by the advertising agency as part of the sale of non-media advertising.(3-31-22)

04.Sale of Custom Made Audio-Visual Films and Audio Recordings. A custom made audio-visual film or audio recording is a film or recording whose intended purpose isn’t for media advertising. Items of custom audio recordings include those to be used with a slide show presentation, designed to be played alone for information purposes or in-store advertising, or other similar purposes. Items of custom films are safety films, training films, filmed newsletters, in-store audio-visual advertising, and other audio-visual films not sold for media advertising.

a.The object of the buyer is to obtain the tangible personal property. The fact that the charge for the tangible personal property, the film or recording, is principally derived from labor or creativity of the maker of the property doesn’t transform the sale of the tangible personal property into a sale of services.(7-1-26)

b.If the advertising agency is the agent of its client, the sale is between the supplier of the tangible personal property and the client and is taxable based on the price charged by the supplier to the client. If the advertising agency isn’t the agent of its client, then the purchase from the supplier is for resale. The sale from the agency to its client is a retail sale and is taxable based upon all charges for copy writing, directing, producing, photographing, acting, vocal artists, recording, editing, mixing, and other similar charges to produce a finished film or audio recording.(7-1-26)

05.Sales of Design Services. Determining whether design fees are taxable will depend on the object of the transaction. A fee charged to a customer for creation and design of a logo, product or business trademark, letterhead, or similar item which doesn’t involve the transfer of tangible personal property beyond that which is to convey the design to the customer, is a sale of services and isn’t taxable. When design fees are services agreed to be rendered as a part of the sale of tangible personal property, sales tax will apply to the design fee. Tax doesn’t apply to such fees when an agency acts as an agent. See Subsection 055.07.e.(7-1-26)

06.Purchases by Advertising Agencies, Graphic Artists, and Similar Operations. Persons engaged in advertising and graphic artists may provide both nontaxable services and taxable sales of tangible personal property.(3-31-22)

a.When providing nontaxable services, including producing media advertising and providing design services which don’t involve the sale of tangible personal property, the agency/artist pays tax on purchases of: Art supplies, such as poster board, paper products, inks, letters, and paints; amount charged by others to produce veloxs, negatives, lithographic plates, electrotype, and other such items; photographic work; prerecorded music and sounds; and props, costumes, and backdrops.(7-1-26)

b.When engaged in the retail sale of tangible personal property, such as the sale of non-media advertising items, custom films, custom audio recordings, or printed goods, the producer/agency/artist, when purchasing tangible personal property to be incorporated into the product for resale, may provide vendors with a properly executed resale certificate. See Section 128. Items considered to be directly incorporated into the product for resale include purchases of: Art supplies such as poster board, paper products, inks, letters, and paints; amounts charged by others to produce veloxs, negatives, lithographic plates, electrotype, and other such items; photographic works; prerecorded sounds and music; and printing charges.(7-1-26)

c.Rental of recording or production studios and equipment. Sales tax will apply to the rental of a recording studio, audio-visual production studio, recording equipment, and audio-visual production equipment, when the owner of the equipment doesn’t furnish the personnel to operate the equipment and relinquishes total operational control of the equipment. A taxable rental also occurs if the studio personnel merely render incidental services such as maintenance and repair. No sales tax will apply to the rental of a recording studio, audio-visual production studio, recording equipment, and audio-visual production equipment when the personnel to operate the equipment is furnished with the rental of the equipment.(7-1-26)

IDAPA 35.01.02.056 Photographers and Photofinishers

Sections 63-3616, 63-3622, 63-3622D, Idaho Code

01.Sales of Photographs.(3-31-22)

a.Printed photographs are tangible personal property. Sales of printed photographs are taxable.

b.Digital photographs are tangible personal property when sold and delivered to the buyer on storage media. Sales of digital photographs are taxable when sold and delivered to the buyer on storage media.(3-31-22)

c.Digital photographs aren’t tangible personal property when delivered electronically or by cloud storage and aren’t taxable.(7-1-26)

02.Sales of Videos. Sales of videos are taxable, as tangible personal property, when sold and delivered to the buyer on storage media. They are also taxable if delivered electronically if the buyer has a permanent right of

use.(7-1-26)

03.Sales by Photographers and Photofinishers.(3-31-22)

a.When photographers or photofinishers sell films, frames, cameras, printed photographs, digital photographs delivered on storage media, photostats, blueprints, etc., they are making a sale of a completed article of tangible personal property and they are to collect the tax on the total sales price unless an exemption applies.(7-1-26)

b.When photographers or photofinishers render service, such as retouching, tinting, or coloring of print photographs belonging to others, they are performing taxable processing services and are to collect the tax from their customers unless an exemption applies. When similar services are performed on a digital photograph, the service is only taxable if the final product is delivered on storage media.(3-31-22)

c.Photographers may charge a sitting fee which may be separately stated from any charges for the photographs. When charged along with a sale of printed photographs or digital photographs delivered on storage media, sitting fees are charges for producing or fabricating tangible personal property and are taxable. See Section

IDAPA 35.01.02.029 (7-1-26)

04.Sales to Photographers and Photofinishers.(3-31-22)

a.Photographers and photofinishers may qualify for the production exemption if they are primarily in the business of selling print photographs or digital photographs delivered on storage media. Photographers and photofinishers primarily in the business of selling digital photographs that are delivered electronically cannot qualify for the production exemption.(3-31-22)

b.The production process begins when the image is captured. Therefore, photographers pay sales or use tax on purchases of props, backdrops and other items used prior to the start of production of the photograph.

Equipment and supplies including cameras, lights, lenses, film, paper, fix, developer, and enlargers used to produce photographs are used during the production process and are exempt if the photographer otherwise qualifies for the production exemption.(7-1-26)

c.Photofinishers may purchase equipment and supplies exempt from sales or use tax as long as the equipment and supplies are directly used to produce print photographs or photographs delivered on storage media, which they will sell and they otherwise qualify for the production exemption.(7-1-26)

05.Definitions. For purposes of this rule, the following terms have the following definition: (3-31-22)

a.Storage media. Storage media include, but are not limited to, optical media discs such as CDs or DVDs, hard drives, diskettes, magnetic tape data storage, solid state drives, flash drives, and other semiconductor memory chips used for nonvolatile storage of information readable by a computer.(3-31-22)

b.Cloud Storage. A method of storing digital data on remote servers, accessible via the internet, rather than on a physical device or local network, managed by a third-party provider.(7-1-26)

IDAPA 35.01.02.057 Dry Cleaners, Laundries, Laundromats, and Linen Suppliers

Sections 63-3612, 63-3622, 63-3622X, Idaho Code

01.Dry Cleaners and Laundries. Dry cleaners perform a service and are not to collect tax from their customers. Dry cleaners pay sales or use tax on purchases of cleaning supplies, hangers, plastic bags and other supplies used in the performance of this service. The purchases of dry-to-dry transfer systems by dry cleaners are exempt from sales and use tax. This exemption applies only to the purchase of entire systems and doesn’t apply to purchases of repair parts for such systems.(7-1-26)

02.Linen Suppliers.(3-31-22)

a.Linen supply firms or laundries which furnish such items as sheets, pillowslips, towels, uniforms, diapers, etc., collect and remit sales tax based on the rental charge. The sales tax will also apply to the rental of shop towels, floor mats for building entrances, dust mops, room deodorizers and any other tangible personal property rented or leased for building maintenance or service.(7-1-26)

b.Items acquired by these firms which are purchased for resale, rental or lease in the ordinary course of business, may be purchased exempt from sales tax if a properly executed resale certificate is provided to the seller.

03.Laundromats.(3-31-22)

a.Receipts from coin-operated washers and dryers are not taxable. Sales of cleaning supplies such as soap or bleach through coin operated vending machines are taxable.(7-1-26)

b.Persons engaged in the laundromat business will pay sales or use tax when purchasing washers, dryers, and other tangible personal property for the operation of their business.(7-1-26)

IDAPA 35.01.02.058 Sales Through Vending Machines

Sections 63-3612, 63-3613, 63-3622, 63-3622L, 63-3622X, 63-3623B, Idaho Code

01.In General. The sale of tangible personal property through a vending machine is a taxable transaction. The term vending machine means any mechanical device which, without the assistance of a human cashier, dispenses tangible personal property to a buyer who deposits cash or cash equivalent in the device. Video games and other coin operated amusement devices are not vending machines. Fees paid for the use of coin operated amusement devices are not subject to sales tax. See Section 109.(7-1-26)

02.Requirement to Obtain a Seller's Permit. Vendors who sell tangible personal property through a vending machine are to obtain a seller’s permit. Only one (1) seller’s permit is needed; however, each vending machine operated by the vendor is to conspicuously display the vendor’s name, address, and seller’s permit number.

When multiple vending machines are placed in a single location, the owner’s name, address, and seller’s permit number need be displayed only once.(7-1-26)

IDAPA 35.01.02.059 Sales by Florists

01.Sales. Florists are retailers engaged in the business of selling tangible personal property and are to collect and remit sales tax from the buyer.(3-31-22)

a.Charges for creating, processing, fabricating, or setting up floral or plant arrangements are taxable, even if separately stated.(3-31-22)

b.Separately stated delivery charges, relating only to the transportation of the product after the sale, are not taxable.(3-31-22)

02.Rentals. The lease or rental of potted plants, palms, artificial wreaths and flowers, or other tangible personal property is taxable.(7-1-26)

03.Sales. Sales tax will be collected on orders taken by an Idaho florist or nursery that will be fulfilled by another florist or nursery, the delivery will take place. The florist or nursery fulfilling this order won’t collect sales

tax.(7-1-26)

a.Telephone, wire, and handling charges in connection with these sales are part of the taxable sales price.(3-31-22)

04.Street Vendors. The above applies to individuals and street vendors as well as florists who maintain a regular place of business.(3-31-22)

060.FEDERAL EXCISE TAXES AND RETAILERS TAXES. -3612, 63-3613, 63-3621, Idaho Code

01.General Rule. The taxable sales price includes any mandatory amount to be paid by a retailer or their customer as a federal importer’s or manufacturer’s excise tax.(7-1-26)

a.Federal taxes on products such as tobacco products, distilled spirits, beer, cheese, mixed flour, processed and renovated butter are included in the taxable sales price.(7-1-26)

b.Any federal tax payable to the wholesaler, importer, manufacturer or other producers, such as taxes on gasoline, automobiles, tires, sporting goods, or other tangible personal property when sold by the wholesaler, importer, manufacturer, or other producer are included in the taxable sales price.(7-1-26)

02.Excluded Federal Taxes. Federal taxes imposed directly on retail sales, such as those imposed by Section 4051, Internal Revenue Code, are excluded from the taxable sales price.(3-31-22)

IDAPA 35.01.02.061 Transportation, Freight, and Handling Charges

01.In General. Whether or not transportation and handling charges are separately stated, the sales price includes any charges made for delivery of goods to the seller. Charges for transportation and handling of goods to the consumer aren’t included as a part of the sales price regardless of when title passes.(7-1-26)

02.Charges Not Separately Stated. Regardless of other provisions of this rule, transportation and handling charges which are not separately stated are included in the taxable sales price.(3-31-22)

03.Charges for Delivery to the Seller. When a customer orders goods from a retailer and the goods are shipped to a store where the customer picks them up, the charge for delivery to the store is included in the taxable sales price.(7-1-26)

04.Freight-In Charges. If a seller of goods orders an item for a customer and the seller separately states fees for freight-in to the seller and freight-out to the consumer on the invoice, the fees for freight-in are part of the taxable sales price. The fees for freight-out aren’t taxable.(7-1-26)

05.Delivery by the Retailer. If a consumer orders goods from a retailer and the retailer delivers the goods to the buyer by means of the retailer’s vehicle. If the retailer separately states the charge for transportation and handling of the goods, the charge is for delivery and handling to the consumer, it isn’t taxable.(7-1-26)

06.Use of Transportation Charges as a Means of Avoiding Sales Tax. If a seller offers to give away merchandise worth approximately what the buyer pays for shipping, the entire price of shipping is taxable. (7-1-26)

07.Demurrage. Demurrage is a charge by a transportation company to its customer for detaining a ship, freight car, or truck beyond the time allowed for loading or unloading. Demurrage charges aren’t taxable when right, power, and control of the ship, freight car, or truck remains with the transportation company.(7-1-26)

062.REPAIRS TO TANGIBLE PERSONAL PROPERTY. 3612, 63-3613, 63-3622, Idaho Code

01.In General. Repairs normally require both material and labor. Persons engaged in the business of repairing, renovating, or altering tangible personal property owned by others are mandatory to collect sales tax on the parts and materials used in the repair or renovation of the property.(7-1-26)

02.Separate Statement of Parts and Materials. The sales price of parts and materials need to be separately stated. Sales tax is charged on parts and materials. Separately stated repair labor isn’t taxable. If parts and materials are not stated separately from repair labor, the total amount for parts, materials, and repair labor is taxable.

03.Repairs Covered by Insurance Benefits. Repairs, the costs of which are covered by insurance benefits, are treated the same as otherwise described in this rule. Sales tax is to be collected on the parts and materials.

Separately stated repair labor isn’t taxable.(7-1-26)

04.Incidental Materials. When a small amount of materials is used to perform a repair, the value of the materials may be insignificant to the entire repair cost. Materials are incidental if the value is insignificant, doesn’t have a reasonable retail price, and are not listed separately on the customer invoice. The repair shop pays tax when purchasing incidental materials.(7-1-26)

05.Shop Supplies. Shop supplies are taxable when purchased by the dealer/repair shop and aren’t included as part of the taxable amount billed to the customer. Shop supplies include spray bottles, buffer pads, towels, masking tape, solvents, sandpaper, and other items that have no specific identifiable value billed to the customer, and don’t become part of the item being repaired.(7-1-26)

06.Repairs Versus Fabrications. Repairs to tangible personal property are not to be confused with fabrications of tangible personal property. Fabricated tangible personal property is subject to sales tax on the entire price whether the parts, materials, and labor are stated separately. See Section 029.(7-1-26)

IDAPA 35.01.02.063 Bad Debts and Repossessions

Sections 63-3612, 63-3613, 63-3619, 63-3626, Idaho Code

01.In General. Sales tax is collected on an accrual basis. The tax is owed to the state at the time of sale, regardless of when the payment is made by the customer.(3-31-22)

02.Rules for Unsecured Credit Sales. The following rules apply to unsecured credit sales: (3-31-22)

a.When a seller cannot collect accounts receivable arising from an unsecured credit sale of tangible personal property subject to sales tax, the seller can make an adjustment on his sales tax return or apply for a refund of taxes according to this rule.(7-1-26)

b.The adjustment or refund may be claimed on the sales tax return for the month in which the bad debt adjustment is made on the books and records of the taxpayer. The tax for which the credit or refund is sought is included in the amount financed and charged off as a bad debt for income tax purposes.(3-31-22)

c.A written claim for the refund may also be filed with the Tax Commission within three (3) years from the time the tax was paid to the Tax Commission. The Tax Commission will review all such refund claims. See Section 117.(7-1-26)

03.Rules for Secured Credit Sales. The following rules apply to secured credit sales:(3-31-22)

a.If the collateral isn’t repossessed, the seller may treat a bad debt the same as an unsecured credit sale.(7-1-26)

b.If the collateral is repossessed and not seasonably resold at a public or private sale, its retention is considered to satisfy the debt and no bad debt adjustment is allowed. “Seasonable resold” means the property was resold within six (6) months of repossession.(7-1-26)

c.If the collateral is repossessed and seasonably resold at public or private sale, then the seller is entitled to a bad debt adjustment. The amount of tax that may be credited or refunded is the amount calculated as worthless less the amount realized from the sale of the collateral. “Amount realized” is the amount for which the goods are sold at a public or private sale.(7-1-26)

d.If merchandise is repossessed and is subsequently resold at retail, sales tax is computed on the sales price and collected and remitted the same as on other retail sales.(3-31-22)

04.Application to Taxpayers. The following rules apply to taxpayers who remit sales tax on an accrual basis but report income tax on a cash basis or aren’t obligated to file income tax returns.(7-1-26)

a.It is mandatory that retailers remit sales tax on an accrual basis, even though their accounting records and income tax returns may be prepared on the cash basis of accounting.(7-1-26)

b.For taxpayers who keep their records and file income tax returns on a cash basis, a worthless account cannot be written off as a bad debt because it hasn’t been recognized as income in the taxpayer’s books.

These retailers may still claim a bad debt for sales tax purposes. The claim should be made when the debt adjustment is made on the books and records, even though the bad debt doesn’t appear on the retailer’s income tax return.

c.Since thes e claims cannot be verified against the income tax returns of these taxpayers, sufficient evidence should be attached to prove that the account has become worthless, that the tax was remitted by the retailer, and that the retailer didn’t receive payment of the tax from the buyer.(7-1-26)

05.Amount of Credit Allowed. The amount of credit that can be claimed is the amount of sales tax that is uncollectible. If both nontaxable and taxable items are financed, credit may be taken only for that portion of the bad debt which represents unpaid sales tax.(3-31-22)

a.Calculation of Bad Debt Attributed to Sales Tax: Assume the tax rate is six percent (6%). A retailer sells a thirty thousand dollar ($30,000) forklift for thirty-one thousand eight hundred dollars ($31,800) including sales tax. The buyer pays a five thousand dollar ($5,000) down payment and finances the balance. The buyer later defaults and the retailer repossesses the forklift and sells it at a public auction for six thousand dollars ($6,000). At the time of repossession the buyer owes seventeen thousand five hundred forty-five dollars ($17,545) including the financed sales tax. After the sale the amount that the retailer writes off is eleven thousand five hundred forty-five dollars ($11,545). The sales tax bad debt write off is six hundred fifty-three dollars ($653).

b.Calculation of Bad Debt Attributable to Sales Tax with Taxable and Nontaxable Charges: Assume the tax rate is six percent (6%). A car dealer makes a taxable sale of an automobile for fourteen thousand nine hundred dollars ($14,900) along with an extended warranty for five hundred dollars ($500), a documentation fee of one hundred dollars ($100), a title fee of eight dollars ($8) and credit insurance for one hundred dollars ($100). The customer pays one thousand dollars ($1,000) cash and trades in a car worth ten thousand dollars ($10,000) which is pledged as security for an earlier outstanding loan of six thousand dollars ($6,000). The customer, therefore, has to borrow enough to pay off the old loan on the trade-in. The customer defaults on the new ten thousand nine hundred eight dollar ($10,908) loan after paying five hundred dollars ($500) towards the principal. The customer damages the automobile in an accident leaving the collateral worthless. The car dealer may take an adjustment for only that portion of the bad debt representing the taxable percentage of the total sales price of the car. Only five thousand dollars ($5,000) of the total fifteen thousand nine hundred eight dollar ($15,908) cost was taxable.

Total taxable sale$30,000 6% sales tax$1,800 Total sale$31,800 Down payment ($5,000)

Total financed$26,800 Payment to principal after sale($9,255)

Amount realized at public sale($6,000)

Total bad debt$11,545 Sales tax portion of bad debt $11,545 - (11,545 / 1.06) =$653 Sales price of vehicle$14,900 Documentation fee$100 Extended warranty$500 Credit insurance$100 Title fee$8 Trade-in($10,000)

Sales tax$300 Subtotal$5,908 Down payment($1,000)

06.Bad Debt Collected Later. If a bad debt account is collected later, the amount collected is taxable.

07.To Claim Credit for a Bad Debt. Credit for bad debts for sales tax purposes may be claimed by the retailer that made the original sale and paid the sales tax to the state. Financial institutions or other third parties who are the assignees of the retailer may claim a bad debt for sales tax on property for which they provided financing, if the amount financed includes the sales tax remitted on the sale of the property. The person who ultimately bears the loss if the buyer of the property defaults on the obligation to repay can make the claim. (7-1-26)

IDAPA 35.01.02.064 (Reserved)

IDAPA 35.01.02.065 Tire Balancing, Studding, and Siping

01.Services Subject to Sales Tax. Sales tax applies to the amount charged for services agreed to be performed in conjunction with the sale of a tire. This includes balancing, studding, siping, and similar charges. The total amount charged for the tire, the services, and the materials used to perform the services is taxable.(7-1-26)

02.Services Not Subject to Sales Tax. The person performing nontaxable services owes tax on the value of the materials they use.(7-1-26)

a.The amount charged for balancing, studding, or siping a tire owned by the customer is a nontaxable service.(7-1-26)

b.A separately stated fee to mount or install a tire is nontaxable whether sold to or owned by the customer.(7-1-26)

03.Materials Used in Performing a Service. Studs, wheel weights, valve stems, cores, patches, and similar items are materials that may be used to perform both a taxable and nontaxable service. The seller may elect to use any consistent method in determining the value and the amount of materials used in performing taxable and nontaxable services. The method selected should represent a reasonable allocation based on their use.(7-1-26)

Invoice total$4,908 Amount financed$10,908 Payment to principal after sale($500)

Amount of bad debt$10,408 Amount of down payment used to pay sales tax:

($300 / $5,908) .0508 x $1,000 = = 5.08% $50.80 Amount of sales tax financed: $300 - $50.80 = $249.20 Percentage of loan representing sales tax: $249.20 / $10,908 = 2.28% Sales tax paid by payments to principal: $500 x 0228 = $11.40 Amount of bad debt write-off: $249.20 - $11.40 = $237.80

IDAPA 35.01.02.066 (Reserved)

IDAPA 35.01.02.067 Real Property

Sections 55 -308, 63-3609, 63-3612, 63-3616, Idaho Code

01.Real Property. The term real property means land and improvements or fixtures to the land.

02.Improvements or Fixtures. Improvements or fixtures to real property include:(3-31-22)

a.Property which is physically attached to the land or other improvements affixed to the land in such a manner that it can’t be removed without materially damaging the real property or is of such a nature that it would normally be expected to be sold together with the land.(7-1-26)

b.Property which increases the market value of the land or increases the ability of the possessor of the land to use it more productively.(3-31-22)

c.Property which increases the market value or productivity on a relatively permanent basis.

03.Three Factor Test. A three (3) factor test may be applied to determine whether an article has become a fixture to real property. The three (3) tests to be applied are:(3-31-22)

a.Annexation to the realty, either actual or constructive.(3-31-22)

b.Adaptation or application of the article to the use or purpose to which that part of the realty is suitable.(7-1-26)

c.Intention to make the article a permanent addition to the realty.(3-31-22)

i.Intention is determined from the surrounding circumstances at the time of installation. It isn’t the undisclosed purpose of the annexor, but rather the intention implied and manifested by their act.(7-1-26)

04.Trade Fixtures. A trade fixture is an item affixed to a building which a business uses for the purpose of trade, manufacture, ornament, or domestic use. A trade fixture is tangible personal property which is easily removed without causing significant damage to the fixture or premises. “Trade fixtures” include display cases, trophy cases, clothing racks, shelving, modular displays, kiosks, wall cases, register stands, and check-out counters. If trade fixtures only benefit the particular business occupying a building, they are not adapted to the use of the real estate and are therefore personal property. A trade fixture will only be deemed to be a real property improvement if:

a.It is affixed to the real estate and its removal would cause significant structural damage to the building itself; or(3-31-22)

b.It is affixed to the real estate and is of benefit to the land or building regardless of the particular business conducted on the premises.(3-31-22)

05.Examples. Available at Sales and Use Tax Examples.(7-1-26)

068.COLLECTION OF TAX. -3619, 63-3621, 63-3633, Idaho Code

01.Bracket System for Six Percent Tax Rate. The sales tax rate is six percent (6%). The following schedule is to be used in determining the amount of tax to be collected by a retailer at the time of sale.(7-1-26)

a.Multiply six cents ($0.06) for every whole dollar included in the sale, and(3-31-22)

b.Add for each additional fractional dollar amount of sale the corresponding tax below:

However, sales to a total amount of eleven cents ($0.11) or less are exempt from tax.(3-31-22)

02.Tax to Be Separately Displayed. The amount of tax collected by the retailer is to be displayed separately from the list price, marked price, the price advertised in the premises or other price on the sales slip or other proof of sale.(7-1-26)

03.Reimbursement of Tax From the Buyer to the Seller. If the seller doesn’t collect the sales tax at the time of the sale and it’s later determined that sales tax should have been collected, the seller can then collect the sales tax from the buyer if the delinquent tax has been paid by the seller. The legal incidence of the tax falls upon the buyer.(7-1-26)

a.The seller is also entitled to collect reimbursement from the buyer of the interest paid on the taxes assessed.(3-31-22)

b.The seller isn’t entitled to reimbursement from the buyer for penalties imposed as part of the assessment against the seller.(7-1-26)

c.The receivable established by the seller seeking reimbursement from the buyer isn’t subject to expiration of the statute of limitations provided in Section 63-3633, Idaho Code.(7-1-26)

IDAPA 35.01.02.069 Interstate Commerce

Sections 63-3612, 63-3613, 63-3621, Idaho Code When tangible personal property is located within the state of Idaho at the time of sale and is delivered within the state of Idaho, such sale is taxable irrespective of where the parties to the contract of sale are located and where the contract was made or accepted or the funds paid. When an individual or company comes into Idaho and purchases tangible personal property or has repairs made to tangible personal property, it is an Idaho sale subject to Idaho sales

tax.(7-1-26)

IDAPA 35.01.02.070 Seller’s Permits

Section 63-3620, 63-3620A, 63-3631,63-3622YY, Idaho Code

01.Seller's Permit and Sales Tax Permit. The terms “seller’s permit” and “sales tax permit” may be used interchangeably. Both refer to the permit issued to a person desiring to engage in business in Idaho as a retailer.

Dollar Amount of Sale Tax 0.00 - 0.03-.00 0.04 - 0.20-.01 0.21 - 0.37-.02 0.38 - 0.53-.03 0.54 - 0.70-.04 0.71 - 0.87-.05 0.88 - 0.99-.06

02.Obtaining a Permit. Application for a permit and instructions are available on the Idaho State Tax Commission website. It is essential for the permit applicant to list each place of business operated by the same person, firm, or corporation. A separate permit number will be obtained for each different business name.(7-1-26)

03.Sales in Leased Premises. When any established business leases a portion of its shelves, counters or floor space to other persons selling tangible personal property to consumers, the sales from such leased space may be included in the tax return of the lessor. When the lessee conducts the leased space in the same manner as a separate business and keeps separate business records, it is mandatory for the lessee to obtain a sales tax permit.(7-1-26)

04.Cancellation of a Sales Tax Permit. It is the responsibility of a permit holder to notify the Tax Commission immediately upon any change in ownership of the permitted business or upon complete or partial termination of the permit holder’s business. Complete or partial termination of a permit holder’s business includes the lease of part or all the business or business location to another party who will be responsible for remitting the sales tax. This notice will include the following information:(7-1-26)

a.This notice will include the date of closure, date of sale or date of lease. If the permit holder doesn’t continue to operate a business under that permit number, the notice will state that the permit should be canceled. The permit holder will return the permit or send a statement, by mail, email, phone call, or Taxpayer Access Point (TAP), that the permit has been destroyed. If the permit holder has sold or leased his business, the notice will state the last day of operation and the name of the new owner or lessee.(7-1-26)

b.If this information isn’t provided to the Tax Commission and the new owner or lessee continues operation of the business on the previous owner’s or operator’s permit, the original permit holder may be liable for all tax incurred during the period that the new owner or lessee operated a business under the previous owner’s permit.

05.Suspension of Sales Tax Permits. A permit holder will notify the Tax Commission of the anticipated discontinuation of a business due to seasonal operation or for any other reason. This notice will contain the date of closure and anticipated date of reopening. Upon receipt of this information, returns will be suspended during the period of closure.(7-1-26)

06.Examples. Available at Sales and Use Tax Rules Examples.(7-1-26)

IDAPA 35.01.02.071 (Reserved)

072.APPLICATION AND PAYMENT OF USE TAX. -3615, 63-3621, 63-3622, Idaho Code

01.Imposition of Use Tax. Use tax is imposed upon the privilege of using, storing, or otherwise consuming tangible personal property within Idaho. The tax is imposed on the value of the tangible personal property.

02.Use. The term “use” doesn’t include use of tangible personal property incidental to the performance of a contract if the owner of the tangible personal property is a business primarily engaged in producing tangible personal property for resale and the property is exempt in Idaho Code. See Sections 012 and 079.(7-1-26)

03.Receipt Showing Idaho Sales Tax Paid. If the property is purchased from a retailer and Idaho sales tax is charged by and paid to the retailer, then no use tax will apply. A purchase order issued by the buyer advising the retailer to charge or include the Idaho sales tax isn’t sufficient evidence that the tax has been paid. The retailer’s receipt provided to the buyer that displays separate statement of the tax relieves the buyer of the use tax requirements.(7-1-26)

04.Out-of-State Purchases. If the property is purchased outside the state or from a retailer not subject to the Tax Commission’s jurisdiction and is subsequently used, stored, or otherwise consumed in this state, then a use tax will apply. The buyer reports and pays use tax directly to the Tax Commission by filing a use tax return on the forms prescribed by the Tax Commission.(7-1-26)

05.Taxes Paid to Another State. The taxpayer may offset from the use taxes payable to Idaho any amount of general sales or use taxes paid to another state on the purchase or use of the same property if paid by the same taxpayer. A credit can’t be claimed for taxes erroneously paid to another state if no taxable sale or use under the laws of that state occurred. In determining whether a tax is due in the state where paid, the Tax Commission will be bound by the laws, rules, and administrative rulings of the state to which tax is paid.(7-1-26)

a.If the amount of tax levied by the state to which it is paid is less than the amount of the Idaho tax due, then the balance will be paid as Idaho tax.(7-1-26)

b.If the amount of tax levied by the state to which it is paid is equal to or greater than the Idaho tax, then there will be no taxes due to Idaho regarding the same transaction or subsequent use of the property.(7-1-26)

c.If the taxes paid to the other state are greater than the Idaho tax, the amount of offset available is limited to the amount of Idaho tax due on the same transaction or use of the property.(3-31-22)

06.Use Undeterminable at Time of Purchase. In some cases, a buyer may be unable to determine at the time of purchase whether or not the property purchased will be used for a taxable or nontaxable purpose. A buyer engaged in both retailing and contracting business might not know whether an item will be sold at retail or withdrawn from inventory and used while performing a contract to improve real property. In these circumstances the buyer may purchase the goods tax exempt if the buyer presents documentation in Section 128. The buyer will maintain adequate accounting control to ensure that use tax is properly accrued on all taxable property.(7-1-26)

07.Tangible Personal Property Removed From Inventory. A retailer or wholesaler may purchase tangible personal property for resale without paying sales tax. The retailer or wholesaler may use inventory in displaying or demonstrating the inventory for purposes of selling the inventory in the normal course of business. If the retailer or wholesaler uses inventory for any purpose besides display or demonstration in the normal course of selling that inventory, the retailer or wholesaler owes use tax. If inventory is consumed during such a display or demonstration, the retailer or wholesaler owes use tax. The retailer or wholesaler calculates the use tax on the value of the tangible personal property. Use tax doesn’t apply to any use or consumption of tangible personal property where such use is specifically exempted from use tax by Idaho Code.(7-1-26)

a.Inventory held for resale becomes subject to use tax at the time the retailer or wholesaler removes the tangible personal property from inventory. If a retailer or wholesaler removes tangible personal property from inventory and then performs additional manufacturing or processing labor, the retailer or wholesaler should calculate use tax on the acquisition cost before the additional labor. However, if a retailer or wholesaler removes tangible personal property after performing additional manufacturing or processing labor, the retailer or wholesaler calculates use tax on the total inventoried cost including the additional labor.(3-31-22)

073.TANGIBLE PERSONAL PROPERTY BROUGHT OR SHIPPED TO IDAHO. -3615, 63-3621, 63-3621A, Idaho Code

01.Equipment Brought into Idaho. Equipment or other tangible personal property brought or shipped to Idaho by residents or nonresidents is presumed to be for storage, use, or other consumption in this state.

Generally, tangible personal property is subject to use tax on its fair market value when it is first used in Idaho.

02.Substantive Use. Any substantive use of the property in Idaho is sufficient to subject the property to use tax. The use tax doesn’t apply to the use of items purchased before July 1, 1965, or the use of items excluded from tax by Idaho Code.(7-1-26)

03.Examples. Available at Sales and Use Tax Rules Examples.(7-1-26)

IDAPA 35.01.02.074 (Reserved)

IDAPA 35.01.02.077 Exemption for Research and Development at the Idaho National

LABORATORY (INL).

Section 6 3-3622BB, Idaho Code

01.Real Property. The exemption doesn’t apply to real property or to tangible personal property which will become improvements or fixtures to real property. See Sections 012 and 067.(7-1-26)

02.Incidental Use of Property. This exemption doesn’t extend to the incidental use of any tangible personal property which fails to meet the test of primary or direct use or consumption.(7-1-26)

a.Areas of support which are considered incidental include: communications equipment; office equipment and supplies; janitorial equipment and supplies; training equipment and supplies; dosimetry or radiation monitoring equipment which lacks the capability of giving an immediate indication and would not result in an immediate evacuation of personnel or shutdown of equipment; subscriptions or technical manuals which provide technology not primarily used or directly connected to the research activity; and hot and cold laundry operations.

b.Materials of common support which are considered incidental include: clothing for weather protection or of a reusable nature; hand tools which are not subject to contamination at the time of initial use; protective coverings which are protection from other than radiation or are of a reusable nature; and all safety equipment and supplies which don’t protect from direct radiation exposure.(7-1-26)

03.Property Directly Used or Consumed. Tangible personal property primarily or directly used or consumed in a research and development activity to perform quality assurance on research equipment isn’t taxable.

Items of a general support nature, such as coveralls, are taxable.(7-1-26)

04.Parts for Equipment. The use of tangible personal property which becomes a component part of research equipment being calibrated within a calibration lab isn’t taxable; whereas the use of parts and equipment in calibrating or for the repair of other maintenance equipment is taxable.(7-1-26)

05.Radioactive Waste. The initial containment or storage of radioactive waste is an exempt use. Any further processing or transporting of such waste not relating to a research and development activity is a taxable use.

06.Agreements with Contractors. The Tax Commission may enter into agreements with contractors engaged in research at the INL prescribing methods by which the contractor or contractors may accrue use tax based on the accounting procedures obligated by the U.S. Department of Energy.(7-1-26)

078.MOTOR FUELS. -2421, 63-2431, 63-3621, 63-3622C, 63-3622D, 63-3622G, Idaho Code

01.Exemptions.(3-31-22)

a.Motor fuels taxed under Title 63, Chapter 24, Idaho Code, are exempt from sales and use taxes. If such purchases are later included in credits or refunds for motor fuels taxes paid and not subject to taxes imposed by Title 63, Chapter 24, Idaho Code, and no other exemption applies, sales and use taxes are applicable.(7-1-26)

b.The sale or use of fuel for subsequent use outside this state and fuel brought into this state in the fuel tanks of vehicles in interstate commerce may be exempt. It is mandatory for carriers engaging in interstate commerce to maintain sufficient verifiable statistical data to substantiate any exemption claimed for fuel purchased in Idaho for use outside this state. In the case of a substantial change in the mode of operation of the carrier or other circumstances that would cause the statistical data to be invalid, the carrier needs to review and adjust the exemption claimed accordingly.(7-1-26)

02.Exclusion from Exemption. Purchase or use of any fuels may be subject to sales and use taxes if no other exemption applies.The following, without limitation, are taxable:(7-1-26)

a.Fuel used by a road contractor in the operation of construction equipment or operation of stationary engines to generate electricity, unless all the electricity generated is used primarily and directly in the processing, manufacturing, or fabricating of tangible personal property to be sold at retail.(7-1-26)

b.Fuel used by private contractors in off-road vehicles in the performance of contracts with any governmental instrumentality.(3-31-22)

IDAPA 35.01.02.079 Production Exemption

01.In General. The production exemption provides an exemption from sales and use taxes for certain tangible personal property used in production activities. Differences in the way a specific taxpayer conducts business can result in taxability determinations that are different for other taxpayers. Determinations of taxability are based upon the equipment’s primary use when such equipment is used for more than one (1) purpose.(7-1-26)

a.For the purposes of this section, a separately operated segment of a business is a segment of a business for which separate records are maintained and which is operated by an employee or employees whose primary employment responsibility is to operate the business segment.(7-1-26)

b.The production exemption doesn’t include the performance of contracts to improve real property, such as road or building construction, or to service-related businesses not devoted to the production of tangible personal property for ultimate sale at retail.(7-1-26)

02.Exempt Purchases. As applied to manufacturing, processing, mining, or fabrication operations, sales and purchases of the following tangible personal property are exempt, except as limited by other subsections of this section:(7-1-26)

a.Equipment such as cranes, manlifts, and scissor lifts used primarily to install production equipment.

b.Equipment used primarily to fabricate production equipment.(3-31-22)

c.Equipment and supplies used in the performance of a quality control function which is an integral and necessary step in maintaining specific product standards.(3-31-22)

03.Production Process Beginning and End. The production process begins when raw materials used in the process are first handled by the operator at the processing plant or site. The production process ends when the product is placed in storage, however temporary, ready for shipment or when it reaches the final form in which it will be sold at retail, whichever occurs last. See Section 083 regarding farming.(7-1-26)

04.Taxable Purchases. The production exemption doesn’t include any of the following:(7-1-26)

a.Motor vehicles that are to be licensed by Idaho law, but not licensed, are taxable. A motor vehicle not obligated to be licensed is exempt under the production exemption only if it meets the tests in Subsection 079.03 of this section.(7-1-26)

b.Paint, plastic coatings, and similar products used to protect and maintain equipment, whether applied to production equipment or other equipment.(7-1-26)

c.Fuel used in equipment while performing activities that don’t qualify for the production exemption.

d.Equipment used primarily to construct, improve, alter, or repair real property.(3-31-22)

05.Transportation Activities.(7-1-26)

a.Transportation includes the movement of tangible personal property over private or public roads or highways, canals, rivers, rail lines, through pipelines or slurry lines, or on private or public aircraft.(3-31-22)

b.Transportation includes movements of tangible personal property from one (1) separate location which is a continuous manufacturing, processing, mining, fabricating or farming activity to another separate location which is a continuous exempt activity or process.(3-31-22)

c.Transportation includes movement of raw materials, except farm produce, from a point of initial extraction or severance or importation to a point where processing, manufacturing, refining, or fabrication begins.

See Section 083 regarding farming.(7-1-26)

06.Special Rules. Special rules apply to irrigation equipment, contractors, loggers, and farmers who act as retailers. Refer to the specific rules relating to those subjects.(3-31-22)

IDAPA 35.01.02.080 Lumber Manufacturing

This sections illustrates the application of the production exemption to the lumber manufacturing industry and is based upon the usual methods of doing business used in the industry In cases not covered by this section, the general principles of the production exemption apply. This section is limited in application to the manufacturing of rough and finished lumber and doesn’t encompass the manufacturing of plywood, particleboard, veneer, or paper products.

01.Nontaxable Activities. Generally considered as nontaxable activities are the following: (3-31-22)

a.Log receiving including log loaders, cranes, and front end loaders.(3-31-22)

b.Log deck/log pond including log loading equipment and boats moving logs from the storage area to the de-barker; sprinkler equipment when used for prevention of product deterioration; and devices used to detect metal in logs.(3-31-22)

c.Debarking equipment used to strip bark from logs including conveyor equipment for moving debarked logs further into the mill or for conveying bark when bark is used as boiler fuel or when conveying bark to a further processing stage.(3-31-22)

d.Chipper, used to produce chips including chip storage bins and pneumatic conveyors.(3-31-22)

e.Mill deck, as used for grading and cutting to length.(3-31-22)

f.Headrig/shotgun, as used for sawing logs.(3-31-22)

g.Edger, as used for edging rough lumber.(3-31-22)

h.Trimmer, as used for trimming to length.(3-31-22)

i.Resaw, as used for producing the proper thickness.(3-31-22)

j.Green chain, as used to determine according to size and species the amount of mandatory time in the dry kiln.(7-1-26)

k.Dry kiln, as used to reduce moisture content. This exemption encompasses fire brick, steam pipe, and fans inside the kiln but doesn’t include improvements to real property.(7-1-26)

l.Unstackers.(3-31-22)

m.Planers, as used for finishing, grading and grade stamping of specialty products.(3-31-22)

n.Boiler when used for the generation of steam used to operate production equipment.(3-31-22)

o.Powerhouse when used to generate power used to operate production equipment.(3-31-22)

p.Waste collection, as used for the collection of waste products for use as fuel for the boiler, generally referred to as hog fuel.(3-31-22)

q.Lumber wrap and steel strapping used for packaging material.(3-31-22)

02.Taxable Activities. Generally considered as taxable activities are the following:(3-31-22)

a.Saw filing activities using saw filing equipment and saw filing supplies.(3-31-22)

b.Shipping, including loading equipment and strapping, seals, and binders used in shipping activities to secure lumber on railroad cars, trucks, etc.(3-31-22)

c.Cleanup.(3-31-22)

IDAPA 35.01.02.081 Underground Mining

This section illustrates the application of the production exemption to the underground mining industry and is based on the usual methods of doing business in the industry. In cases not covered by this section, the general principles apply.(7-1-26)

01.Nontaxable Purchases. The following are generally considered nontaxable:(3-31-22)

a.Development of known ore deposits, including diamond drilling and other activities to develop levels, laterals, crosscuts, drifts, stopes, raises and shafts.(3-31-22)

b.Support materials, including, timber, concrete, rock bolts, shotcrete, matting, and equipment used to install them.(3-31-22)

c.Drilling of blast holes to facilitate the extraction of ore including pneumatic rock drills and compressors used to supply compressed air to operate pneumatic rock drills.(3-31-22)

d.Blasting to facilitate the extraction of ore using explosives, caps, fuses, etc.(3-31-22)

e.Slushing/mucking to convey broken ore and waste to passes and chutes using scrapers, slushers, muckers, hoists and loaders, and backhoes used to recover both ore and waste.(3-31-22)

f.Hauling, horizontal transportation, to transport ore, waste, men or materials from chutes into cars and the movement of the cars to shaft stations using skips, hoists, hoist cable, shafts, shaft timbers, shaft stations, shaft pockets, shaft guides, concrete, etc.(3-31-22)

g.Haulage, vertical transportation, to hoist ore, waste, men or materials in skips, using skips, hoists, hoist cable, shafts, shaft timbers, shaft stations, shaft pockets, shaft guides, concrete, etc.(3-31-22)

h.Transportation to the surface to load the ore, waste, men or materials into main haulage cars for transportation using locomotives, haulage cars, track and track spikes, fuel batteries used to power locomotives, and conveyors and conveyor belts.(3-31-22)

i.Backfilling to pump tailings back underground as hydraulic sandfill to backfill mined-out areas using, pumps, sumps, pipe, and concrete.(3-31-22)

j.Personal equipment including hard hats, miners’ lights, belts, and batteries.(3-31-22)

k.Sampling/assaying for quality control purposes.(3-31-22)

l.Safety equipment and supplies mandated by a state or federal agency when used directly in a mining area.(7-1-26)

02.Taxable Purchases. The following are generally considered taxable:(3-31-22)

a.Diamond drilling activities used for exploration.(3-31-22)

b.Air ventilation and conditioning if an improvement to real property including fans, motors, vent ducts; coolers; and air doors.(3-31-22)

c.Water lines and pumps used to remove water from the mine if improvements to real property.

d.Safety equipment and supplies used somewhere other than a mining area, such as an office, or not mandated by a state or federal agency even if used in a mining area.(7-1-26)

e.Maintenance and cleanup using backhoes, except when the primary use is to recover ore or waste; equipment used to repair or maintain mining equipment; battery maintenance equipment including battery chargers, and shop supplies and other materials or supplies which don’t become a component part of production exempt equipment.(7-1-26)

f.Sampling/assaying for purposes other than quality control.(3-31-22)

IDAPA 35.01.02.082 Aboveground, Open Pit, Mining

Sections 47-701, 47-701A, 63-3605H, 63-3622, 63-3622D, 63-3622X, 63-3622HH, Idaho Code This section illustrates the application of the production exemption to the aboveground, open pit, mining industry and is based on the usual methods of doing business in the industry. In cases not covered by this section, the general principles of the production exemption apply. This section applies only to activities related to aboveground mining, which doesn’t include soil extraction.(7-1-26)

01.Exempt Purchases. The following are generally considered nontaxable:(3-31-22)

a.Drilling and blasting, to loosen overburden for removal or, to define limits of existing ore bodies using track drills, rotary drills, and compressors to operate them, drill rods, drill bits, explosives, caps, fuses, etc., for this purpose.(3-31-22)

b.Ore and overburden extraction and removal using front end loaders, track loaders, power shovels, backhoes, scoop loaders, and similar equipment used to extract and load ore or strip and load overburden. (3-31-22)

c.Hauling of ore and overburden to stockpiles, loading sites, or disposal sites on the mine site using scrapers, carryalls, and off-highway trucks and trailers.(3-31-22)

d.Ore sorting, grading, sizing, and crushing operations, including unloading from transport devices using bulldozers, front end loaders, crushers, conveyors, and similar equipment.(3-31-22)

02.Taxable Purchases. The following are generally considered taxable:(3-31-22)

a.Exploration, where the primary purpose is to discover new ore bodies using equipment, including rotary drills, drill rigs, blasting equipment, seismic equipment, cats, bulldozers, and other materials and supplies, primarily used for such activities.(3-31-22)

b.Real property improvements, construction, and maintenance activities, including materials and equipment used primarily for constructing or maintaining buildings, fences, railroads, concrete pads and footings, and roads. Equipment, including cranes, concrete equipment, and post hole diggers primarily used for such purposes.

Materials and supplies, including lumber, steel, roofing, trusses, fence posts, gates, and wire; and concrete, rebar, and re-mesh.(3-31-22)

c.Maintenance and cleanup activities, including those where the primary purpose is to maintain equipment and facilities or cleanup grounds and roads, except where cleanup activities are done primarily to recover ore. Shop or other equipment used primarily to repair, clean, or maintain production equipment, including welders, lathes, shop tools, hoists, cranes, mechanics’ trucks, oiling trucks and trailers, steam cleaners, and testing equipment.

Shop and other materials and supplies which won’t become a component part of production equipment.(7-1-26)

d.Land reclamation activities, including activities where mined ore pits or panels are filled in, shaped, and reseeded, including seed or seedlings, fertilizers, soil conditioners, soil, and bulldozers, scrapers, and seed drills primarily used for this purpose; however, equipment primarily used for ore and overburden extraction and loading is exempt, even though this equipment is also used in land reclamation.(3-31-22)

e.Transportation of personnel and materials, including transportation to and from worksites or about the mine in general using buses, people movers, trailers, trucks, or similar equipment.(3-31-22)

f.Equipment and supplies used in transportation activities where ore or overburden is moved between geographically separated mine sites, processing plants or disposal sites, if 1) a substantial break in the production activities occurs, and 2) the activity doesn’t sort, grade, size, crush, or in some other way further process the ore. Transportation activities include loading, transporting, unloading, and stockpiling. A substantial break in the production activities occurs when the product is transported between geographically separated production sites by means of public roads, waterways, airways, railways, or any other public means. The production facility to which the product is transported is a separate processing facility, and the equipment and supplies used to transport the product taxable. Taxable equipment includes: trucks and trailers, whether licensed or unlicensed; railroad equipment; barges and other watercraft; pipelines; conveyors; front end loaders; and bulldozers. If the means of transport to processing plants, smelters, etc., doesn’t constitute a substantial break in the process, such as a slurry line directly from the mine to the plant, then the loading and unloading activities are not taxable.(7-1-26)

g.Personnel support activities, including facilities, equipment, and supplies for eating, sleeping, and recreation. Taxable items include eating trailers, utensils and food, beds, linens, clothing provided to employees at no charge, and pool tables.(7-1-26)

083.FARMING AND RANCHING. -3603, 63-3622, 63-3622D, 63-3622W, 63-3622X, 63-3622HH, Idaho Code This section illustrates the application of the production exemption to the farming and ranching industry and is based on the usual methods of doing business in the industry. In cases not covered by this section, the general principles of the production exemption apply.(7-1-26)

01.In General. Farming applies to a business operated with the intention of making a gain or profit.

Farming doesn’t include operation of ranches or stables where the sole purpose is showing or racing horses, or the breeding of show or race horses.(7-1-26)

02.Transportation Activities. Equipment used to move farm produce to initial storage is exempt, even though it may be mounted on a vehicle which is mandated to be licensed and is taxable. Equipment qualifies for this exemption if:(7-1-26)

a.It is readily removable from the vehicle on which it is mounted;(3-31-22)

b.It is separately stated on the vendor’s invoice; and(3-31-22)

c.It’s sold to a qualified farming operation.(7-1-26)

03.The Farming Exemption Doesn’t Include:(7-1-26)

a.Property purchased to meet the personal needs of a farmer, a farmer’s family, or employees. Items excluded from the exemption include, but are not limited to, hand soap, toothpaste, shampoo, blankets, sheets, pillowcases, towels, washcloths, irrigation boots, coveralls, gloves, other clothing, and grocery items.(7-1-26)

b.Food and supplies purchased for barnyard and household pets, such as cat and dog food, are taxable. Even though a dog may occasionally be used for herding livestock or a cat may control mice in the barn, the supplies purchased for their care and maintenance don’t qualify for the production exemption. Only when a dog’s SOLE purpose is the herding or protection of a rancher’s livestock may the food and supplies for the dog be purchased tax exempt under the production exemption.(7-1-26)

c.Livestock trailers which may be attached to motor vehicles used to transport horses, cattle, sheep, or other farm animals on public roads are transportation equipment and are taxable.(3-31-22)

d.Motor vehicles mandated to be licensed are taxable even when used exclusively in a farming operation. Motor vehicles purchased, but not licensed, by a farmer for use exclusively in an off-road production activity, such as a feed truck, are not taxable.(7-1-26)

04.Farmers. When farmers sell their grain, livestock, and other horticultural products for resale or processing, the sale isn’t taxable if the buyer provides a properly executed exemption certificate to the farmer. When farmers sell directly to consumers or users, they will obtain a seller’s permit, collect sales tax, and pay the tax on those sales to the Tax Commission.(7-1-26)

IDAPA 35.01.02.084 Containers Returnable/Nonreturnable

Sections 63-3622, 63-3620E, Idaho Code

01.Container. A container encloses or will enclose tangible personal property which is sold at wholesale or retail. A container may be comprised of one (1) or more components. Items used as shipping supplies which don’t enclose the product are not considered to be containers.(7-1-26)

02.Taxable Containers. Containers subject to sales and use tax include containers used by persons who are providing a service rather than selling a product.(7-1-26)

03.Supplies. Shipping, selling, or distribution supplies are not considered to be containers and are taxable when purchased by the shipper, seller, or distributor, such as:(3-31-22)

a.Shipping pallets and lumber stickers when not banded or shrink wrapped to the product to be sold, thereby not becoming a part of the container.(3-31-22)

b.Banding or binders used to secure goods to transportation equipment.(3-31-22)

c.Price stickers and address labels affixed to containers that don’t provide any product information such as weight, quantity, nutritional value, or other necessary product description.(7-1-26)

IDAPA 35.01.02.085 Sales to and Purchases by

NONPROFIT ORGANIZATIONS. -3622, 63-3622O, Idaho Code The Sales Tax Act doesn’t provide any general exemption for charitable or nonprofit organizations, corporations, associations, or other entities. Specific statutory provisions provide exemptions for some charitable organizations.

Unless an exemption is clearly granted to a specific organization or to specific sales or purchases by a specific organization or a class of organization, no exemption applies. Special rules apply to religious organizations. (7-1-26)

IDAPA 35.01.02.086 (Reserved)

088.SALE OR PURCHASE OF MATTER USED TO PRODUCE HEAT BY BURNING. -3612, 63-3613, 63-3622, 63-3622G, Idaho Code

01.Heating Matter. Matter used to produce heat by burning includes natural gas, liquefied propane, coal, wood, oil, petroleum, and their by-products. The phrase “used to produce heat by burning” means the act of incineration of material in a furnace or similar device for the purpose of raising or maintaining the temperature in an enclosed space, dwelling, or building including a building under construction, and includes heating water and cooking.(7-1-26)

02.Bulk Sales. Heating matter delivered in bulk to a dwelling or building for the purpose of producing heat by burning and properly identified by the seller in their books and records, on the delivery ticket, and invoice to the customer, relieves the vendor of the responsibility to obtain a sales tax exemption certificate from the buyer.

03.Liquefied Propane. Sales of liquefied propane in units of fifteen (15) gallons or less is considered to be used to produce heat or for domestic home use by burning. These sales don’t require a properly executed sales tax exemption certificate from the buyer. These sales are exempt from tax regardless of the use to which the buyer places the liquefied propane.(7-1-26)

04.Documentation of Other Exempt Sales. Sales of natural gas, liquefied propane (over fifteen (15) gallons), coal, wood, oil, petroleum, and its by-products are taxable, unless exempted or excluded elsewhere in the Sales Tax Act. Sales are documented in the following manner:(7-1-26)

a.If purchased for resale, the seller obtains a properly executed resale certificate from the buyer.

b.If purchased to produce heat or domestic home use by burning and isn’t bulk delivered, the seller either:(7-1-26)

i.Obtains a properly executed exemption certificate from the buyer; or(7-1-26)

ii.Has the buyer to complete a stamped or imprinted statement on a sales invoice or purchase order containing the following:

This tax exemption statement qualifies if this statement is signed by the buyer and contains all the of the following information: buyer’s name, buyer’s address, a Federal Employer Identification Number (EIN) or driver’s license number, and state of issue. The statement is;

I certify that the fuel purchased will be used in a device for the purpose of domestic home use or heating an enclosed space, dwelling, or building. By signing this statement, I understand and know that submitting a false claim can result in tax due, interest, criminal and civil penalties. ___________________________________

c.The signature of the buyer on this statement will be in addition to any other signature on the invoice, receipt, or purchase order.(7-1-26)

IDAPA 35.01.02.089 (Reserved)

IDAPA 35.01.02.091 Sales to American Indian Tribal Members

01.Sales to American Indians.

American Indians make sales tax free purchases if these purchases are made within the boundaries of an American Indian Reservation. The retailer will retain documentation supporting the fact that a buyer is an enrolled member of an American Indian Tribe. Presentation of an identification card issued by one (1) of the American Indian tribes will be acceptable for this purpose.(7-1-26)

02.Records. The retailer will maintain records in support of these exempt sales. Any of the following methods are accepted by the Tax Commission:(7-1-26)

a.Recording of the buyer’s name and number from the buyer’s tribal identification card on the sales slip.(3-31-22)

b.Recording the name and number from the buyer’s tribal identification card on the cash register tape beside the record of the purchase.(3-31-22)

c.Completion of an exemption certificate recording the number from the buyer’s tribal identification card.(3-31-22)

03.Sales of Motor Vehicles to Indians. See Section 107.(7-1-26)

092.OUT-OF-STATE SALES. -3612, 63-3613, 63-3622Q, Idaho Code The seller will maintain records to support the out-of-state sales exemption.(7-1-26)

IDAPA 35.01.02.093 (Reserved)

IDAPA 35.01.02.094 Exemptions on Purchases by Political Subdivisions, Sales by the State of

IDAHO, ITS DEPARTMENTS, INSTITUTIONS, AND ALL OTHER POLITICAL SUBDIVISIONS. -3609, 63-3612, 63-3613, 63-3622, 63-3622O, Idaho Code

01.Sales by Political Subdivisions. Sales by the state or any political subdivision are subject to sales tax which is to be collected by the political subdivision. If taxable sales are made, a permit is mandatory. This permit is to be obtained by each sales outlet or by the office at which regular and current sales records are maintained.

Taxable sales include sales of tangible personal property, admission charges, fees to use recreational facilities, recreational program fees, copies of documents for which a fee isn’t set by Idaho Code and garbage service when receptacles or dumpsters are provided by the service and part of the fee represents rental of the receptacle.(7-1-26)

a.Taxable sales. Taxable sales of tangible personal property include sales of: code books; books sold by library, book fairs, etc.; maps; crime prevention signs; calendars; cafeteria sales to employees or the public; office supplies or any sale to employees; concession stands; trees, shrubs, or bedding plants; items sold to prisoners, such as cigarettes, candy, pop, etc., through vending machines; chemicals for noxious weeds; unclaimed property; chemicals for pest control; surplus property-assets; gravel, culverts, or pipe; uniforms to employees; equipment rentals with no operator; grave markers; rental of other property, golf carts, swimsuits; and nonresident or resident library cards. See Section 058.(7-1-26)

b.Admission charges. Taxable admission charges include fees for using golf courses and swimming pools, for attending athletic events, concerts, fireworks displays, and fund-raising events.(7-1-26)

c.Use of facilities for recreation. Taxable use of facilities for a recreational purpose include receipts from the use of park structures, picnic tables, fair grounds, rodeo grounds, gymnasiums, ball parks, snowmobile areas and campground areas. Exception: If an individual or organization rents or leases one (1) of these facilities and charges admission to each person using the facility, tax shouldn’t be charged on the rental or lease of the facility.

However, the individual or organization will apply for a seller’s permit number, under which the tax on the admission will be reported and paid.(7-1-26)

d.Recreation program fees. Fees to participate in recreational programs are taxable. Some of these programs are city recreational programs in softball, baseball, basketball and football. If instruction is included in such activities as tennis, golf, or swimming, the tax isn’t due on the separately stated instructional portion of the total fee.

If not separately stated, the entire fee is taxable.(7-1-26)

e.Garbage service. Garbage service is taxable on that portion of the total charge which is the rental of the receptacle such as a dumpster. If the statement for service includes the rental of the dumpster or other receptacle but the rental charge isn’t separately stated, the entire cost of the service is taxable.(7-1-26)

02.Federal Government . Sales to and purchases by the federal gov ernment and its instrumentalities are not subject to Idaho sales or use taxes except as provided by federal laws or regulations. Federal law also prevents the state of Idaho from imposing sales tax on any sales by the federal government or its instrumentalities. For purposes of Idaho sales and use tax, the American Red Cross is an instrumentality of the federal government.

03.Other States. Sales to and purchases by states OTHER than Idaho and their political subdivisions are taxable if delivery occurs in Idaho.(7-1-26)

095.MONEY-OPERATED DISPENSING EQUIPMENT. -3612, 63-3613, 63-3622, 63-3622II, Idaho Code

01.Money-Operated Dispensing Equipment. Money-operated equipment that dispenses tangible personal property includes equipment operated by a debit or credit card.(7-1-26)

02.Parts, Kits, or Supplies. This exemption doesn’t apply to parts, kits, or supplies used to repair, refurbish, or upgrade the dispensing equipment.(7-1-26)

096.IRRIGATION EQUIPMENT AND SUPPLIES. -3622W, 63-3622HH, Idaho Code

01.Agricultural Irrigation. To qualify for the exemption, the irrigation equipment or supplies need to be used directly and primarily for agricultural irrigation purposes. If the use of the equipment or supplies is only incidental or only indirectly related to the agricultural irrigation process, tax applies. These include:(7-1-26)

a.An off-highway motorbike or all-terrain vehicle, ATV, used to transport men or equipment is indirectly related to the irrigation process.(3-31-22)

b.Irrigation boots worn to protect the irrigator are incidental to the process and are taxable. (3-31-22)

02.Nonagricultural Irrigation Equipment or Supplies. Irrigation equipment or supplies used for any purpose other than agriculture, such as irrigation pipelines or sprinkler systems used on a golf course, hobby farm, residence, and vacation home, are taxable.(7-1-26)

03.Real Property Improvements. The exemption applies regardless of whether the equipment becomes a part of real estate. It isn’t necessary to distinguish between pipeline which retains its identity as tangible personal property and pipeline which may become incorporated into real property such as buried mainline pipe.

04.Title to Equipment. The exemption applies regardless of whether the equipment is installed by a farmer, a contractor, or a subcontractor. The incidence of tax won’t turn upon the determination of whether title to the irrigation equipment passed at the time of sale or after installation.(7-1-26)

IDAPA 35.01.02.097 (Reserved)

098.FOREIGN DIPLOMATS. -3610, 63-3622, 63-3622O, Idaho Code

01.In General. The United States Government grants immunity from state taxes to diplomats from certain foreign countries. The diplomat is issued a federal tax exemption card by the U.S. Department of State. The cards are nontransferable and bear a photograph of the holder, a federal tax exemption number, and specific instructions as to the extent of the exemption granted to the diplomat.(3-31-22)

02.Federal Tax Exemption Cards. Federal tax exemption cards list all restrictions on tax exemptions on the face of the card, including whether or not the card privileges extend to both official and personal purchases.

03.Documentation. A retailer documents exempt sales to a foreign diplomat by:(3-31-22)

a.Retaining a copy of the front and back of the federal tax exemption card to support the exempt sale; or(3-31-22)

b.Recording for their permanent record the name of the bearer, the mission represented, the federal tax exemption number displayed on the card, the date of expiration, and the nature of the exemption granted to the diplomat.(3-31-22)

099.OCCASIONAL SALES. -3610, 63-3622K, 63-3622YY, Idaho Code

01.Occasional Seller. An occasional seller of tangible personal property will provide a written statement to the buyer if requested.(7-1-26)

a.The written statement should include the following:(7-1-26)

i.Seller’s name;(7-1-26)

ii.Seller’s address;(7-1-26)

iii.Date;(7-1-26)

iv.Description of items sold;(7-1-26)

v.A statement that the seller isn’t a retailer and has made no more than one (1) other sale of tangible personal property within the last twelve (12) months; and(7-1-26)

vi.Seller’s signature.(7-1-26)

b.The buyer will retain the seller’s statement as evidence that the purchase of tangible personal property isn’t subject to use tax.(7-1-26)

c.Sales arranged by a third party are taxable. If any sales agent, licensed or unlicensed, participates in the sale of tangible personal property, the sale is taxable.(7-1-26)

02.Sales by a Business. Sale of assets or other tangible personal property by a business that requires a seller’s permit are excluded from the occasional sales exemption. Even when the item sold isn’t typically sold by the seller in the regular course of business, the sale is taxable unless another exemption applies. Example: A construction equipment dealership sells its office computer. Even though the seller does not normally sell computers, it collects sales tax on the sale of the computer as the computer is used in a business requiring a seller’s permit.(7-1-26)

03.Yard Sales. Yard sales include sales referred to as garage sales, moving sales, and other similar sales if the requirements of this section are met.(7-1-26)

a.Tangible personal property may be sold exempt at a home yard sale if it meets the following requirements:(7-1-26)

i.The sale lasts no more than a few days.(7-1-26)

ii.The seller isn’t in the business of regularly selling the same or similar property as what is sold at the yard sale.(7-1-26)

iii.The items offered for sale are not purchased for the purpose of reselling them.(7-1-26)

iv.The items offered for sale are owned by the seller.(7-1-26)

v.The sale is conducted at the seller’s home.(7-1-26)

vi.The seller has no more than two (2) yard sales in a calendar year.(7-1-26)

b.If two (2) or more sellers jointly hold a single yard sale, it counts as one (1) of the two (2) exempt yard sales for each seller participating.(7-1-26)

100.PRESCRIPTIONS. -3612, 63-3613, 63-3622, 63-3622N, Idaho Code

01.Documenting Exempt Sales. The seller keeps the written prescription or work order on file to document an individual’s exemption. Sales made without a prescription or work order are taxable. The seller needs to be able to identify sales which are exempt under prescription from sales which are taxable.(7-1-26)

a.Refills of prescriptions on file with a seller aren’t taxable.(7-1-26)

b.Some drugs may be lawfully sold without a prescription. When sold over the counter without a prescription, the drugs are subject to sales tax. When sold under a prescription, the drugs aren’t taxable.(7-1-26)

02.Purchases by Practitioners. A practitioner, who is licensed under Title 54, Idaho Code, to administer or distribute a medical product listed in Section 63-3622N, Idaho Code, may purchase the item exempt from tax. Only the medical items named in Section 63-3622N, Idaho Code, which the practitioner is licensed to administer or distribute qualify for this exemption.(7-1-26)

03.Purchases by Nursing Homes and For-Profit Hospitals. The Sales Tax Act doesn’t provide a general exemption from tax for purchases made by nursing homes and similar facilities or by hospitals operated for profit. As a result, they pay tax on all purchases, unless those items are exempted by Section 63-3622N, Idaho Code.

IDAPA 35.01.02.101 Motor Vehicles and Trailers Used in

INTERSTATE COMMERCE.

Sections 49 -123, 63-3612, 63-3613, 63-3622, 63-3622R, Idaho Code

01.In General. An exemption from the sales and use tax is provided for the sale or lease of motor vehicles and trailers to commercial or private carriers to be substantially used in interstate commerce. This exemption is commonly called the International Registration Plan (IRP) Exemption. Commercial or private carriers are in the business of transporting persons or commodities owned by the carrier or another. Farm vehicles or noncommercial vehicles as defined by Section 49-123, Idaho Code, don’t meet the requirements of this exemption.(7-1-26)

02.Documentation. Buyers claiming this exemption provide the seller or lessor with a properly completed Exemption Certificate. When a vehicle qualifying for this exemption is purchased from a retailer who isn’t registered to collect Idaho sales tax, the buyer and provides a properly completed exemption certificate to the county assessor or Department of Transportation when titling or registering the vehicle in Idaho. See Section 128. (7-1-26)

03.Repair Parts and Supplies. The exemption doesn’t apply to parts, supplies, or other tangible personal property purchased by persons engaged in interstate commerce. Purchases of glider kits as defined by Section 49-123, Idaho Code, will qualify if they are assembled into glider kit vehicles that will be immediately registered under the International Registration Plan (IRP).(7-1-26)

102.LOGGING. -3605C, 63-3622D, 63-3622HH, 63-3622JJ, 63-3622KK (1)(d), Idaho Code

01.In General. The Sales Tax Act provides an exemption from sales and use taxes for certain tangible personal property used in logging activities. The provisions of this section are based on the usual methods of doing business in the logging industry. Specific factual differences in the way a specific taxpayer conducts business can result in determinations different from those stated in this section. Since some equipment may be used for more than one (1) purpose, determinations of taxability will be made based upon the primary use of the equipment.(7-1-26)

02.Real Property. The logging exemption applies only to tangible personal property. It doesn’t apply to real property or to tangible personal property purchased for the purpose of becoming an improvement or fixture to real property. See Section 067 for a definition of real property.(7-1-26)

03.Property Used in Logging Operations. The logging exemption applies to tangible personal property primarily used in a logging activity without regard to the primary business activity of the person performing the logging.(7-1-26)

04.Logging Process Begins and Ends. The logging process begins when forest trees are first handled by the logger at the site where such an operation occurs. The logging process ends when the product is placed on transportation vehicles at the loading site, ready for shipment.(3-31-22)

05.Directly Used. Directly used, as applied to logging, means the performance of any of the following functions when such functions occur between the point at which the logging operation begins and the point at which the operation ends, as defined in Subsection 102.04:(7-1-26)

a.The performance of a function in the logging process that effects a physical change in the property being logged so as to render the property more marketable.(3-31-22)

b.The performance of a function which occurs simultaneously with and which is an integral part of and necessary to a function which effects a physical change in the property being logged rendering it more marketable.(3-31-22)

c.The performance of a function which is an integral and necessary step in a continuous series of functions which effect a physical change in the property being logged rendering it more marketable.(3-31-22)

d.The performance of a quality control function which is an integral and necessary step in maintaining specific product standards.(3-31-22)

06.Not Included in Logging Exemption. Along with tangible personal property referenced in Idaho Code, the logging exemption doesn’t include the following activities and equipment:(7-1-26)

a.Road construction equipment and supplies such as tractors, road graders, rollers, water trucks, whether licensed or unlicensed, explosives, gravel, fill material, dust suppression products, culverts, and bridge material.(3-31-22)

b.Slash disposal or brush piling and clearing equipment and supplies, such as brush clearing machines, brush rakes, and tractors, except when part of the operation of a tree farm.(3-31-22)

c.Reforestation equipment and supplies.(7-1-26)

d.Safety equipment and supplies, including hard hats and earplugs.(3-31-22)

e.Transportation equipment and supplies including vehicles to transport logs from the loading site to the mill, whether the vehicles are licensed or unlicensed, and cable and tie-downs used to fasten logs to the vehicle.

f.Paint, plastic coatings, and all other similar products used to protect and maintain equipment, whether applied to logging equipment or other equipment.(7-1-26)

g.Harvesting timber for firewood.(3-31-22)

07.Election to Pay Sales Tax. The owner of a log loader, log jammer, or similar fixed load motor equipment used in logging, not normally licensed for use on public roads, may elect to license and pay sales tax on the motor equipment rather than placing it on the personal property tax rolls, if the motor equipment may be legally operated on a public road as a commercial vehicle.(3-31-22)

a.Motor equipment licensed at the time of purchase. Sales tax applies to the total purchase price of the motor equipment.(3-31-22)

b.Motor equipment licensed after the date of purchase. Use tax applies to the fair market value of motor equipment on which no sales or use tax has been paid and which was not licensed at the time of purchase, if acquired within the last seven (7) years. See Section 63-3633, Idaho Code. Fair market value may be determined from the personal property tax records of the county assessor.(3-31-22)

IDAPA 35.01.02.103 (Reserved)

104.RAILROAD ROLLING STOCK, PARTS, MATERIALS AND EQUIPMENT. -3622, 63-3622CC, 63-3622DD, Idaho Code

01.Definitions. As used in this section, the following terms have the following meanings.(7-1-26)

a.Railroad rolling stock. Flanged-wheel locomotives, railroad cars, maintenance of way equipment and other flanged-wheel vehicles designed and manufactured specifically for use on railroad tracks and railroad systems, including component parts thereof.(3-31-22)

b.Remanufacture/rebuild. To reconstruct, remake, reassemble or reprocess railroad rolling stock to materially extend the life of the equipment. This process requires extended removal of the railroad rolling stock from the transportation stream.(3-31-22)

c.Equipment. All equipment, other than railroad rolling stock, which is used in the actual remanufacturing/rebuilding process.(3-31-22)

d.Parts. Tangible personal property which becomes part of the remanufactured/rebuilt railroad rolling stock or which becomes part of the equipment.(7-1-26)

e.Materials. Tangible personal property which is used or consumed in the actual process of remanufacturing/rebuilding railroad rolling stock.(3-31-22)

f.Used in interstate commerce. Railroad rolling stock is used in interstate commerce when it performs a function which is necessary to the operation of a business which transports goods or people between two (2) or more states.(3-31-22)

g.Repair. To mend or restore to good usable condition railroad rolling stock which has not been damaged to an extent requiring extended removal from the transportation stream.(3-31-22)

h.Maintenance. Routine, periodic activities, such as lubrication and filter and oil changes, which are necessary to the continued use and operation of railroad rolling stock.(3-31-22)

i.Primary or primarily. Used more than fifty percent (50%) of the time to remanufacture/rebuild railroad rolling stock.(3-31-22)

02.Generally, Included Within the Exemption:(3-31-22)

a.Fuel used in testing remanufactured/rebuilt engines which are railroad rolling stock, and fuel used in equipment which is necessary to, and primarily used in, the remanufacturing/rebuilding process.(7-1-26)

03.Generally, Excluded from This Exemption:(3-31-22)

a.Motor vehicles and trailers which are licensed or mandated are to be licensed even though they may have flanged-wheel attachments which enable travel on railroad tracks.(7-1-26)

b.Tangible personal property which is used in such a way that it becomes a fixture to, or an improvement to, real property.(3-31-22)

c.Tangible personal property, equipment, parts, materials, used or consumed in an activity which is primarily repair or maintenance of railroad rolling stock.(3-31-22)

d.Fuel used in activities other than those stated in Subsection 104.03.d. of this rule and which isn’t exempt under other provisions of the Sales Tax Act.(7-1-26)

e.Tangible personal property used in related activities which are not primarily remanufacturing/ rebuilding activities, including: office equipment and supplies; safety equipment and supplies; equipment, other than railroad rolling stock, which is primarily used to construct, improve, alter or repair real property; and chemicals, solvents, and other cleaning agents used primarily for maintenance of the remanufacturing/rebuilding processing area.(3-31-22)

105.TIME AND IMPOSITION OF TAX, RETURNS, PAYMENTS, AND PARTIAL PAYMENTS. -3046, 63-3619, 63-3621, 63-3623, 63-3634, Idaho Code

01.Time and Imposition of Tax.(3-31-22)

a.Sales Tax. Sales tax is imposed, computed and collected at the time of sale, without regard to the provisions of any contract relating to the time or method of payment. In the case of installment sales, sales on account, or other credit sales, the seller reports as a taxable sale the entire sales price for the month in which the sale is made. No part of the sales tax may be deferred until the time the retailer collects payment from the buyer. A sale occurs when title to property passes through delivery to the customer or absolute and unconditional appropriation to a contract. Lease or rental payments are taxable during the month or other period for which the property is leased or rented.(3-31-22)

b.Use Tax. Use tax is determined at the time of the use, storage or other consumption of tangible personal property in Idaho. The tax is reported and payable in accordance with the provisions of this rule. Persons making purchases subject to use tax should apply for a use tax permit number from the Tax Commission.(7-1-26)

02.Returns.(3-31-22)

a.Monthly Filing. All retailers and persons subject to use tax are obligated to remit the tax to the state on a monthly basis unless a different reporting period is allowed by the Tax Commission. The remittance will include all sales and use tax due from the first through the last day of the preceding calendar month.(7-1-26)

b.Request to File Quarterly or Semiannually. Retailers or persons who owe seven hundred-fifty dollars ($750) or less per quarter and have established a satisfactory record of timely filing and payment of the tax may request permission to file quarterly or semiannually instead of monthly.(3-31-22)

c.Request to File Annually. Retailers or persons who have seasonal activities, such as Christmas tree sales or repeating fair booths, may request permission to file annually. Approval of the request is at the discretion of the Tax Commission and is limited to taxpayers who have established a satisfactory record of timely filing and payment of the tax.(7-1-26)

d.Variable Filing. If the Tax Commission finds it necessary for the administration of the Sales Tax Act, it may assign an account to a taxpayer with a variable filing requirement. In such a case the taxpayer wouldn’t be obligated to file returns at regular intervals. The Tax Commission may also create one-time filing only accounts for taxpayers who are making a single payment of sales or use tax.(7-1-26)

e.Change in Filing Frequency. If the Tax Commission finds it necessary for the efficient administration of the Sales Tax Act, it may require taxpayers reporting taxable sales of less than twelve thousand dollars ($12,000) per year to file annually.(7-1-26)

f.Final Report. Whenever a taxpayer who has an obligation to file sales tax returns stops doing business , the taxpayer marks cancel on the last return the taxpayer files. This return ends the taxable year for sales or use tax purposes and constitutes the taxpayer’s final report of sales or use tax activities or liabilities. The taxpayer encloses their seller’s permit with their request for cancellation or sends a written statement that the permit has been destroyed. If the taxpayer continues business activity after filing a final report, they may be subject to liabilities or penalties.(7-1-26)

03.Valid Return. A tax return or other document filed will meet the conditions prescribed below.

Returns missing anything listed below are invalid. They may be rejected and returned to the taxpayer to be redone and refiled. A taxpayer who doesn’t file a valid return is considered to have filed no return. A taxpayer’s failure to properly file in a timely manner may result in penalties. Perfect accuracy isn’t necessary for a valid return, although each of the following conditions is expected:(7-1-26)

a.It is submitted on the proper form, as prescribed by the Tax Commission and is complete. (7-1-26)

b.If necessary, copies of all pertinent supporting documentation are attached.(7-1-26)

c.The tax liability is calculated and has sufficient supporting information, if necessary, to demonstrate how the result was reached. A return that doesn’t provide sufficient information to compute a tax liability doesn’t constitute a valid return.(7-1-26)

d.All sales and use tax returns or other documents filed by the taxpayer will include the relevant sales or use tax permit number.(7-1-26)

e.The submission shows an honest and genuine effort to satisfy the requirements of the law.

04.Extension of Time to File.(7-1-26)

a.The Tax Commission may, for good cause, grant authority for a taxpayer to file for an extension of time by filing an estimated return. When filing the Extension of Time estimated return, the taxpayer attaches a written request which sets forth the reason for estimating. The Tax Commission will review each request to determine if there is good cause for filing an Extension of Time estimated return. If the Tax Commission determines that the request should be denied, the taxpayer will be notified in writing and a penalty will apply to any delinquent tax due when the original return is filed.(7-1-26)

b.If the return for any period is filed on an estimated basis, the estimated return is to be filed timely and reconciled to actual figures by filing an original return within one (1) month of the due date. Any additional tax due as a result of reconciliation is to be remitted when the original return is filed and should include interest on any unpaid balance due from the due date of the return.(7-1-26)

c.The estimated tax remitted is to be at least ninety percent (90%) of the total sales and use tax due for the period or one hundred percent (100%) of the total sales and use tax due for the same month of the prior year. If the estimated tax paid is less than these requirements, a five percent (5%) penalty may be applied to the remaining tax

due.(7-1-26)

d.Taxpayers wishing to file an Extension of Time estimated return will need to contact the Tax Commission to obtain the necessary forms.(7-1-26)

05.Sale and Use Tax Returns. The original return will be completed with the amount of total sales, nontaxable sales, taxable sales, items subject to use tax, and tax due inserted in the blanks. Payment will accompany the return. A complete sales and use tax return will be filed by each retailer or person subject to use tax. This return will be on a form prepared and mailed to the taxpayer by the Tax Commission. If the original is lost or destroyed, a substi tute form will be supplied upon request.(7-1-26)

a.Retailers Report Own Use and Nontaxed Transactions. All retailers report any sales or purchases on which no sales or use tax was collected or paid. Goods sold or produced and consumed by the retailer, items withdrawn from stock for personal use or employee use, stock removed and used for gift or promotional purposes, or any combination of such uses are taxable.(3-31-22)

b.Reporting Adjustments. Any adjustments for additional tax due or credits claimed should be made on the next return due after the adjustments are discovered. These adjustments are to be shown on the line designated for adjustments on the return form and will be accompanied by an explanation and any documents that support the claimed adjustment.(7-1-26)

06.Payment of Tax.(3-31-22)

a.Payment to Accompany Return. The sales and use tax return filed is to be accompanied by a remittance of the total amount due as shown on the return. Checks or other negotiable instruments should be made payable to the Tax Commission.(7-1-26)

b.Payment of One Hundred Thousand Dollars ($100,000) or Greater. All taxes due to the state are to be paid by electronic funds transfer whenever the amount due is one hundred thousand dollars ($100,000) or greater.

c.Remittance of Collections--Bracket Exception. Retailers are obligated to remit all taxes collected from buyers, except any difference that may result from use of the bracket system described in Section 068. Any taxes erroneously collected in excess of those properly due should be refunded to the buyer by the retailer. If the retailer either cannot or doesn’t make the refund during the period for which the return is due, then the retailer reports the erroneously collected taxes on the return and pay them to the Tax Commission. If the erroneously collected taxes are subsequently refunded to the buyer from whom they were collected, the retailer may claim a credit or refund of sales taxes in accordance with Section 117. Under no circumstances may a retailer retain any amount collected as sales or use tax which is greater than the retained amount authorized under the bracket system by Section 068.

07.Filing Dates--General Rule. The filing date for all sales or use tax returns is the twentieth day of the calendar month immediately following the last day of the reporting period, unless otherwise allowed by these rules. This is the filing due date for all regular monthly, quarterly, semiannual, and annual accounts. If the twentieth is a Saturday, Sunday, or legal holiday, the return is due on the next following day which isn’t a Saturday, Sunday, or legal holiday.(7-1-26)

106.VEHICLE SALES, RENTALS, AND LEASES. -3610, 63-3612, 63-3613, 63-3619, 63-3621, Idaho Code

01.Vehicles Purchased from Idaho Dealers. A title application form completed by the dealer showing Idaho sales tax collected is evidence that the buyer paid sales tax to the dealer.(7-1-26)

02.Vehicles Purchased from Private Parties.(3-31-22)

a.Private party sales of vehicles are taxable. The county assessor will collect tax on the gross sales price at the time of titling and registration.(7-1-26)

b.The buyer presents a bill of sale or receipt as proof of the gross sales price. Canceled checks won’t be accepted in lieu of a bill of sale. In the absence of a bill of sale or receipt supporting the sales price of the vehicle, tax is collected on the value established as the average condition trade-in value in the most recent J.D. Power Official Used Car Guide for the same make, model, options, year, mileage, and condition.(7-1-26)

c.A trade-in allowance isn’t allowed on a private party sale.(7-1-26)

d.A barter or exchange of vehicles or other property is taxed on the value of the vehicles and other property involved in the exchange. In the absence of documentation supporting the value of the vehicle(s), tax is collected on the value established as the average condition trade-in value in the most recent J.D. Power Official Used Car Guide for the same make, model, options, year, mileage, and condition.(7-1-26)

03.Vehicles Purchased from Retailers.(3-31-22)

a.A retailer obligated to have an Idaho seller’s permit collects sales tax when selling a vehicle, even if they are not licensed as a vehicle dealer. The retailer gives the buyer the title to the vehicle, properly completing title transfer information on the title, including the retailer’s seller’s permit number as proof that Idaho sales tax was collected. The retailer will also give the buyer a bill of sale stating:(7-1-26)

i.The date of sale;(7-1-26)

ii.The name and address of the seller;(7-1-26)

iii.The complete vehicle description, including the vehicle identification number (VIN) that agrees with the VIN on the title;(7-1-26)

iv.The person to whom the vehicle was sold;(7-1-26)

v.The amount for which the vehicle was sold; and(7-1-26)

vi.The amount of sales tax charged.(7-1-26)

b.If a retailer doesn’t collect sales tax, the retailer will be held liable to pay the tax unless they can provide one (1) of the following to the Tax Commission(7-1-26)

i.Satisfactory evidence that the buyer paid tax to the county assessor;(7-1-26)

ii.A properly executed exemption certificate.(7-1-26)

04.Vehicles Rented or Leased.(3-31-22)

a.A rental or lease of a vehicle is taxable. See Section 024.(7-1-26)

b.If a lessor doesn’t collect sales tax on a purchase option, the lessor will be held liable to pay the tax unless they can provide one (1) of the following to the Tax Commission:(7-1-26)

i.Satisfactory evidence that the buyer paid tax to the county assessor; or(7-1-26)

ii.A properly executed exemption certificate.(7-1-26)

c.The lessor collects and remits sales tax on each lease payment received from the renter or lessee.

The sales tax is applicable whether the vehicle is leased or rented on an hourly, daily, weekly, monthly, mileage, or any other basis.(3-31-22)

d.Out-of-state lessors are to obtain a seller’s permit and comply with this rule. If the county assessor cannot verify that the lessor is properly registered to collect the tax, title and registration could be denied.(7-1-26)

IDAPA 35.01.02.107 Vehicles and Vessels – Gifts, Military Personnel, Nonresidents, New

RESIDENTS, TAX PAID TO ANOTHER STATE, SALES TO FAMILY MEMBERS, AND OTHER

EXEMPTIONS. -3605L, 63-3621, 63-3622K, 63-3622R, Idaho Code

01.Gifts of Vehicles. When the following facts clearly establish that a vehicle is being transferred as a gift from the titleholder to another, the vehicle can be transferred tax exempt if:(3-31-22)

a.No money, services, or other consideration is exchanged between the donor and recipient at any time, the recipient assumes no indebtedness, and the relationship of the donor and recipient indicates a basis for a gift.

b.The donor will provide the recipient properly executed exemption certificate. The recipient will submit it to the county assessor along with the title to the vehicle being transferred. If the donor is unable to sign the affidavit, the recipient can submit either:(7-1-26)

i.A letter stating the vehicle is a gift, and signed by the donor, may be accepted by the county assessor and attached to the affidavit; or(3-31-22)

ii.The title may be marked as a gift and signed by the donor.(3-31-22)

02.Purchases Brought into Idaho by Nonresidents.(3-31-22)

a.For purposes of the nonresident exemption, a motor vehicle is considered to have been used in Idaho for a day when it is present in this state for more than sixteen (16) hours during any twenty-four (24) hour period.(7-1-26)

b.A limited liability company (LLC) or other legal entity formed by an Idaho resident under the laws of another state primarily for the purpose of purchasing and owning one (1) or more vehicles or vessels isn’t a nonresident. The use of a vehicle owned by such an entity will be subject to use tax upon its first use in Idaho.

03.New Residents. If an owner obtained a registration or title from another state or nation of residence more than ninety (90) days before moving to Idaho, this is proof that it was purchased primarily for use outside Idaho.

New residents entering Idaho with a vehicle titled or registered in a state that doesn’t impose a general sales and use tax will be obligated to provide a properly executed exemption certificate and submit it to the county assessor when applying for a title transfer or registration certificate.(7-1-26)

04.Military Personnel.(3-31-22)

a.If a military person and any accompanying spouse who own a vehicle obtained a registration or title from another state or nation of residence prior to receipt of orders to transfer to Idaho or ninety (90) days prior to moving to Idaho, whichever time period is shorter, this is proof that the vehicle was primarily for use outside Idaho.

Military personnel and any accompanying spouse entering Idaho with a vehicle titled or registered in a state that doesn’t impose a general sales and use tax will provide a properly executed exemption certificate and submit it to the county assessor when applying for a title transfer or registration certificate. A military person whose home of record is Idaho is a resident of this state and doesn’t qualify for any exemption when bringing their vehicles back to Idaho.

Military personnel receive no special exemption from the Idaho sales and use tax for purchases in Idaho of vehicles or other tangible personal property while temporarily assigned in this state.(7-1-26)

05.Tax Paid to Another State. Credit may be given for any general sales or use tax paid to another state. See Section 072. A registration certificate or title issued by another taxing state is sufficient evidence that tax was imposed at the other state’s tax rate. This doesn’t apply to states that don’t have a general sales tax, such as Alaska, Montana, and Oregon, or when a state has exempted the vehicle from tax.(7-1-26)

06.Sales to Family Members. No tax applies to sales of motor vehicles between the following blood or legally adopted relatives: parents, children, grandparents, grandchildren, brothers, and sisters. This doesn’t include persons who are related only by marriage. However, when the motor vehicle sold is community property, and it is sold to a qualifying relative of either spouse, the sale is exempt from tax. The recipient will provide a properly executed exemption certificate and submit it to the county assessor when applying for a title transfer or registration certificate. This exemption doesn’t apply if the seller didn’t pay tax when the vehicle was acquired.(7-1-26)

07.Sales to Nonresidents. To qualify for the nonresident exemption, the buyer needs to be a nonresident of Idaho. An Idaho resident may form an LLC or other legal entity under the laws of another state. If such an LLC or other entity is formed primarily for the purpose of owning one (1) or more vehicles or vessels it isn’t a nonresident. The purchase or use of a vehicle or vessel in Idaho by such an entity is taxable.(7-1-26)

IDAPA 35.01.02.108 Purchase or Use of Vehicles by Dealers, Rental Companies, and

MANUFACTURERS.

Sections 49 -1627, 49-1628, 63-3612, 63-3613, 63-3622, 63-3623, Idaho Code

01.Buying for Resale. Licensed vehicle dealers, rental companies, and manufacturers may purchase vehicles without paying sales tax when the vehicles are held for resale or rental and are only used for retention, demonstration, or display while holding the vehicles in the regular course of business. Purchases of parts installed on vehicles held in a resale inventory are exempt from sales tax.(7-1-26)

02.Titling a Vehicle. A vehicle can’t be titled without documentation showing sales or use tax has been correctly paid with the following exceptions for dealers and rental companies:(7-1-26)

a.An Idaho dealer may title vehicles held for resale in the dealership name to ensure clear title to the vehicle. However, if the vehicle is registered in the dealership name, they will owe tax.(7-1-26)

b.Rental companies may title and register vehicles held in their rental inventory in their company name without paying tax.(7-1-26)

03.Dealer Plates. Any vehicle upon which a dealer’s plate may be lawfully displayed is inventory held for sale and not taxable. If any use of a vehicle displaying a dealer plate requires that the dealer provide the user with a compensation form for federal income tax purposes, the amount reported is subject to use tax. The use tax will be paid by the dealer in the month immediately following the issuance of the compensation form. If a dealer makes unauthorized use or display of a dealer’s plate on a vehicle which is otherwise obligated to be titled or licensed under the laws of the state of Idaho, the dealer owes use tax on the vehicle.(7-1-26)

04.Service Vehicles. Vehicles which are not held in inventory for sale or rental, such as loaner, work, or service vehicles, are taxable at the time of their purchase. Use tax will be reported and paid on the sales tax return.

In titling the vehicle, the vehicle dealer reports their seller’s permit number to the county assessor or Department of Transportation as evidence that sales or use tax has been paid.(7-1-26)

05.Inventory Withdrawals. Dealers may withdraw vehicles from inventory and put them to a use for which a dealer’s plate isn’t authorized, creating a requirement for the vehicles to be titled and licensed. Titled and licensed vehicles are taxable. Rental companies that withdraw vehicles from their rental inventory and put them to a taxable use also owe tax. Dealers and rental companies may choose one (1) of the following methods for reporting the tax:(7-1-26)

a.Report and pay use tax on their acquisition cost at the time the vehicle is withdrawn from resale inventory; or(7-1-26)

b.For each month or part of a month during which a vehicle is held for purposes other than resale, report and pay use tax on a reasonable monthly rental value. A reasonable monthly rental value is fair market rental or lease value for vehicles of similar make and model.(7-1-26)

IDAPA 35.01.02.109 Amusement Devices

Section 6 3-3623B, Idaho Code

01.Requirement to Obtain Permit. The owner or operator of amusement devices obtains a seller’s permit if the owner or operator makes retail sales other than the use of amusement devices. If the owner or operator doesn’t make such other retail sales, the owner or operator will obtain an amusement device permit for each amusement device in service.(7-1-26)

a.Upon receiving the appropriate payment, the Tax Commission will issue to the owner or operator of one (1) or more amusement devices, a permit for each amusement device in service. The owner or operator affixes a separate permit on each amusement device in service. The permit will be affixed to the machine in such a manner that it is easily visible. Permits are transferable from one person to another after written notice of the transfer is received and acknowledged by the Tax Commission. Permits may be transferred from an amusement device that is no longer in service to another amusement device owned or operated by the same person. An amusement device permit isn’t valid unless the name and business address of the owner or operator is typed or printed in black ink on the face of the permit.(7-1-26)

b.Video amusement devices may have more than one (1) monitor and be designed to be operated independently by more than one (1) person. In such cases a separate permit is mandated for each monitor.(7-1-26)

c.Amusement device permits are renewed annually. Annual permits are valid from July 1 through June 30 and are renewed on or before July 1 by the owner or operator of the amusement devices. Amusement devices acquired after July 1 or placed in service before the next July 1 will require the appropriate fee for a full-year permit.

d.If an amusement device permit is lost, stolen, or destroyed, an amusement device permit for the current year will still need to be affixed to every operating amusement device. This may require the purchase of a new permit. The Tax Commission won’t issue free replacement amusement device permits regardless of the reason for the loss of the permit.(7-1-26)

03.Other Amusement Machines or Games. Charges for the use of machines or games which don’t meet the definition are taxable at the prevailing rate times one hundred percent (100%) of the gross proceeds received for the use of the device. This applies regardless of the method the owner or operator uses to determine the charge, such as by the hour or by the game. The owner or operator of such amusement machines or games will obtain a seller’s permit if the owner or operator charges for the use of such machines.(7-1-26)

110.RETURNS FILED BY COUNTY ASSESSORS AND FINANCIAL INSTITUTIONS. -3623, 63-3632, 63-3634,63-3638(9), Idaho Code

01.Filing Returns. Upon collection of sales tax on applications for certificate of title to a motor vehicle, trailer, or other titled property, or initial application for registration processed by the county assessor, the assessor will, no less than monthly, complete and submit to the Tax Commission, an Idaho Sales Tax Return-County Assessors. The assessor may, at their discretion, submit the form more frequently. But at no time will the amount of tax collected during any month be submitted later than the twentieth day of the month following the month in which the tax was collected.(7-1-26)

02.Reimbursement. The assessor and the Idaho Transportation Department will be reimbursed at the rate of one dollar ($1) for each application for certificate of title or initial registration of a motor vehicle, trailer, or other titled property; each Transport Trailer, Office Trailer, and Untitled Boat Certificate; and each Occasional Sale Exemption Claim -- Office Trailer and Transport Trailer, processed by the assessor except those upon which any sales or use tax due has been previously collected by a retailer or paid by the buyer.(7-1-26)

03.Financial Institutions. Financial institutions collecting tax on sales of tangible personal property that they are financing, whether sold by the financial institution or another person, are to possess an Idaho seller’s permit and file returns to remit the tax. If the tax collected isn’t from a sale made by the financial institution, it can be reported as an adjustment on the return. Failure to remit the tax on a timely basis will result in the addition of penalties and interest.(7-1-26)

111.RECORDS AND AUDITING OF RECORDS. -3611, 63-3624, Idaho Code

01.In General. Every retailer doing business in this state and every buyer storing, using, or otherwise consuming in this state tangible personal property will keep complete and adequate records as may be necessary for the Tax Commission to determine the amount of sales and use tax for which that person is liable under Title 63, Chapter 36, Idaho Code.(7-1-26)

a.Unless the Tax Commission authorizes an alternative method of record keeping in writing, these records will show gross receipts from sales or rental payments from leases of tangible personal property, including any services that are a part of the sale or lease, made in this state, irrespective of whether the retailer or buyer regards the receipts to be taxable or nontaxable; all deductions allowed by law and claimed in filing the return; and the total purchase price of all tangible personal property purchased for sale or consumption or lease in this state.(7-1-26)

b.These records include the normal books of account ordinarily maintained by the average prudent businessman engaged in such business, together with all bills, receipts, invoices, cash register tapes, or other documents of original entry supporting the entries in the books of account, together with all schedules or working papers used in connection with the preparation of tax returns.(3-31-22)

c.For taxpayers that maintain required records in both a machine-sensible and a hard-copy format, that taxpayer will make the records available to the Tax Commission in machine-sensible record format upon the Tax Commission's request. Machine-sensible records are to be maintained in the original format for the same time periods for hard-copy records outlined in Subsection 111.04 of this section. “Machine-sensible record” is a collection of related information in an electronic format. This doesn’t include hard-copy records that are created or recorded on paper or stored in or by an imaging system such as microfilm, microfiche, or storage-only imaging systems. (7-1-26)

02.Alternative Storage Media. Records, including general books of account, such as cash books, journals, voucher registers, ledgers, and like documents may be retained by a storage-only imaging system and the original hard-copy documents may be discarded when all other conditions of this rule are met. A storage-only imaging system involves computer hardware, software, and other reproduction equipment that provides for the storage, retention, and retrieval of records and documents which were originally created on paper. It doesn’t allow for any manipulation or processing of the documents. These records are to be authentic, accessible, readable, and meet the following requirements:(7-1-26)

a.Appropriate facilities are to be provided for preservation of the storage media for the periods open to examination and the taxpayers will provide transcriptions of any information on imaged data which may be mandatory for verification of tax liability.(7-1-26)

b.All imaged data are to be indexed, cross-referenced, and labeled to show beginning and ending numbers and to show beginning and ending alphabetical listing of documents included, and systematically filed to permit ready access.(7-1-26)

c.The taxpayer will make available upon request of the Tax Commission facilities and equipment in good working order at the examination site for reading, locating, and reproducing any record concerning sales or use tax liability maintained on storage-only imaging system.(7-1-26)

d.The taxpayer will set forth in writing the procedures governing the establishment of its storage-only imaging system and the individuals who are responsible for maintaining and operating the system with appropriate authorization from the Board of Directors, general partners, or owner, whichever is applicable.(7-1-26)

e.The storage-only imaging system is to be complete and used consistently in the regularly conducted activity of the business.(7-1-26)

f.The taxpayer will establish procedures with appropriate documentation so that the original document can be followed through the conversion system.(3-31-22)

g.The taxpayer is responsible for the effective identification, processing, storage, and preservation of storage-only imaging system making it readily available for as long as the contents may become material in the administration of any state tax law.(7-1-26)

h.The taxpayer is to keep a record identifying by whom the storage-only image system was produced.

i.When displayed or reproduced on paper, the material is to exhibit a high degree of legibility and readability. For this purpose, legibility is defined as the quality of a letter or numeral that enables the observer to identify it positively and quickly to the exclusion of all other letters or numerals. Readability is defined as the quality of a group of letters or numerals being recognizable as words or complete numbers.(3-31-22)

j.All production and processing duplication, quality control, storage, identification, and inspection thereof are to meet acceptable industry standards.(7-1-26)

03.Records Prepared by Automated Data Processing Systems, ADP. An ADP tax accounting system may be used to provide the records for the verification of tax liability. Although ADP systems will vary from one taxpayer to another, all such systems are to include a method of producing legible and readable records which will provide the necessary information for verifying such tax liability. The following requirements apply to any taxpayer who maintains any such records on an ADP system:(7-1-26)

a.Recorded or re-constructible data. ADP records will provide an opportunity to trace any transaction back to the original source or forward to a final total. If detailed printouts are not made of transactions at the time when they are processed, the systems are to have the ability to reconstruct these transactions.(3-31-22)

b.General and subsidiary books of account. A general ledger, with source references, is to be written out to coincide with financial reports for tax reporting periods. In cases where subsidiary ledgers are used to support the general ledger accounts, the subsidiary ledgers will also be written out periodically.(3-31-22)

c.Supporting documents and audit trail. The audit trail is to be designed so that the details underlying the summary accounting data may be identified and made available to the Tax Commission upon request. The system is to be so designed that supporting documents, such as sales invoices, purchase invoices, credit memoranda, and like documents are readily available.(7-1-26)

d.Program documentation. A description of the ADP portion of the accounting system is to be made available. The statements and illustrations as to the scope of operations should be sufficiently detailed to indicate:

The application being performed; the procedures employed in each application, which might be supported by flowcharts, block diagrams, or other satisfactory descriptions of the input or output procedures; the controls used to insure accurate and reliable processing; and important changes, together with their effective dates, are to be noted in order to preserve an accurate chronological record.(7-1-26)

e.Data storage media. Adequate record retention facilities are to be available for storing tapes and printouts, as well as all supporting documents as may be mandated by law or this section.(7-1-26)

04.Record Retention. All records pertaining to the transactions involving sales or use tax liability are to be preserved for a period of not less than four (4) years. If an assessment has been made and an appeal to the Tax Commission or any court is pending, the books and records relating to the period under appeal by such proposed assessment will be preserved until final disposition of the appeal.(7-1-26)

05.Examination of Records. All of the foregoing records are to be made available for examination on request of the Tax Commission or its authorized representatives.(7-1-26)

06.Failure of the Taxpayer to Maintain or Disclose Complete and Adequate Records. Upon failure by the taxpayer, without reasonable cause, to substantially comply with the requirements of this rule, the Tax Commission will:

a.Im pose any penalty as may be authorized by law.(3-31-22)

b.Subpoena attendance of the taxpayer and any other witness when the Tax Commission deems it necessary or expedient for examination and compel the taxpayer and witness to produce any documents within the scope of its inquiry relating in any manner to the sales and use tax.(7-1-26)

c.Enter such other order as may be necessary to obtain compliance with this rule in the future by any taxpayer found not to be in substantial compliance with the requirements of this rule.(3-31-22)

112.DIRECT PAY AUTHORITY. -3624, 63-3629, 63-3631, Idaho Code

01.In General. A Direct Pay Authority is granted to certain taxpayers where it is to the mutual convenience of the Tax Commission, the taxpayer, and the taxpayer’s vendors to have the sales and use tax liability upon the taxpayer’s purchases determined by the taxpayer and reported directly to the state in the form of a use tax.

This authorization allows vendors to sell all items of tangible personal property to the taxpayer without charging any sales tax. The only effect of this arrangement is to shift the reporting responsibility to the taxpayer holding the authorization.(7-1-26)

02.Taxable Purchases. If the particular transaction would have been taxable without the authorization, then the taxpayer holding the authorization pays sales tax to the state even if the use of the item isn’t subject to use tax. If the taxpayer holding the authorization buys goods from a retailer holding an Idaho seller’s permit, then the taxpayer pays sales tax on the transaction even if the goods are intended for use solely outside the state.(7-1-26)

03.Documentation. To purchase tangible personal property without paying sales tax to the vendor, the taxpayer holding an authorization provides a copy of that authorization to each vendor.(3-31-22)

04.Holder's Responsibilities. The authorization is granted only to those taxpayers who have demonstrated, to the Tax Commission’s satisfaction, the accounting and technical capability to comply with the Sales Tax Act. Direct pay authority holders make all purchases of tangible personal property tax exempt and all taxes due as mandated by the Idaho Sales Tax Act will be remitted directly to the Tax Commission by the direct pay authority holder. Vendors will be allowed to sell all items of tangible personal property to the direct pay authority holder without charging sales tax provided they obtain and keep on file a copy of the letter granting the direct pay authority.

05.Revocation. The Tax Commission may revoke authorization if it determines that the taxpayer isn’t complying with this rule or if the taxpayer is allowing contractors or other third parties to make exempt purchases under its authority. Notice of revocation will be given in the manner provided for deficiencies in taxes in Idaho Code and is subject to review as provided in Idaho Code. Should the Tax Commission revoke a taxpayer’s direct pay authority, it will be the taxpayer’s responsibility to notify his vendors of the revocation.(7-1-26)

06.Tax Imposed by Hotel/Motel Room Sales Tax. The authorization can’t be used for taxes imposed on lodging accommodations. State sales tax, Travel and Convention tax, and Auditorium or Community Center District tax, when applicable, is charged by and paid to the retailer by the direct pay permittee.(3-31-22)

07.Valid Only on Purchases of Tangible Personal Property. The authorization is valid only on purchases of tangible personal property. The taxpayer can’t use the authorization when engaging contractors involved in improving real property.(7-1-26)

08.Expiration. Direct Pay Authority is granted for a period of five (5) years. If the authorization isn’t renewed at the end of the expiration period, the authorization will expire automatically.(7-1-26)

113.RECREATIONAL VEHICLE REGISTRATION. -3612, 63-3622K, 63-3622R, 63-3622HH, Idaho Code

01.Snowmobile, Motorbike, ATV, or UTV. A new owner of a new or used snowmobile, motorbike, or ATV will obtain a title for the recreational vehicle with the Idaho Transportation Department. The buyer will present evidence that sales tax was paid to the seller of the recreational vehicle, or pay any tax due before a title will be issued.(7-1-26)

02.Boat. A boat owner registers his boat each year with the Department of Parks and Recreation through authorized agents appointed by that department.(3-31-22)

a.When registering the boat for the first time or transferring the registration to a new owner, the owner will complete a valid exemption except as provided in Subsection 113.02.c. of this section.(7-1-26)

b.Each month the Department of Parks and Recreation will forward to the Tax Commission the copies of the valid exemption submitted by its agents.(7-1-26)

c.When registering a boat with a county assessor acting as an authorized agent of the Department of Parks and Recreation, the requirements of this rule don’t apply. The assessor will collect and remit to the Tax Commission any sales or use tax due.(7-1-26)

IDAPA 35.01.02.114 Sales Under the Snap and Wic Programs, Records for Payments with

ELECTRONIC BENEFIT TRANSFER CARDS AND WIC TENDER. -3622EE, 63-3622FF, Idaho Code

01.In General. Sales of food purchased under the Federal Supplemental Nutrition Assistance Program (SNAP) or the Federal Special Supplemental Food Program for Women, Infants, and Children (WIC) are exempt from the Idaho sales tax. Sales of food under these programs are exempt whether the buyer uses electronic benefit transfer (EBT) cards, WIC tender, or any other exchange medium authorized for these programs by federal law.

02.Records. Retailers who accept EBT cards or WIC tender as payment are to maintain accurate records of those sales. Adequate records include sales reports or tender-type reports with collections of each type.

115.RECORDS, NONTAXED SALES BY RETAIL FOOD STORES. 3624(d), Idaho Code

01.Retail Food Store. For the purposes of this section, retail food stores means grocery stores; meat and fish markets; fruit and vegetable markets; candy, nut, and confectionery stores; dairy product stores; retail bakeries; and egg and poultry dealers who’s sales are more than fifty percent (50%) for home preparation and consumption.(7-1-26)

02.Form. Retail food stores may apply for reduced record keeping requirements by submitting a Petition for Sales Tax Records Reduction by a Retail Food Store to the Tax Commission.(7-1-26)

03.Authority. If authority for reduced record keeping is granted by the Tax Commission, a retail food store isn’t mandated to keep detailed sales invoices if a properly completed resale or exemption certificate is obtained from the customer and thereafter a properly completed Sales Tax Exemption Claim Form-Grocer for each exempt sale. The completed claim form includes the following information: the name of the customer; the total purchase price of the exempt items; the date of the sale; whether the nontaxed merchandise sold consisted of food, nonfood items or both; and the signature of the person making the exempt purchase. If available, the retail food store may keep records electronically on the point of sales system.(7-1-26)

116.BONDING. 3625, Idaho Code

01.Posting Security. The Tax Commission may require a retailer to post security to ensure collection and remittance of sales and use taxes for cause including:(7-1-26)

a.A retailer failing to file sales tax returns.(3-31-22)

b.A retailer failing to remit in full taxes due upon any sales tax return.(3-31-22)

c.A retailer with a consistent history of delinquency either in the filing of returns or payment of tax.

d.The submission of a check for the payment of taxes which is subsequently dishonored.(3-31-22)

e.The filing of a fraudulent return or any return which fails to report all taxable transactions for the period for which the return relates.(3-31-22)

f.A retailer evidencing serious financial instability which, in the opinion of the Tax Commission, creates reasonable doubt as to the ability of the retailer to pay over sales and use taxes collected.(7-1-26)

02.Written Demand. The written demand for security will be sent to the retailer by the Tax Commission by certified mail or by personal service. Failure of the retailer to post the demanded security can be grounds for revocation of the retailer’s seller’s permit following proper notice and hearing.(7-1-26)

03.Forms of Security. The Tax Commission will accept the following as security:(7-1-26)

a.Surety bond. A surety bond issued by a bonding company with the power of an attorney affixed thereto which grants the issuing agent the power to obligate the company for this type of liability.(3-31-22)

b.Cash bond. Preferably in the form of a cashier’s check.(7-1-26)

c.Pledged savings accounts. This type of security may be furnished, providing the savings account is opened with a bank or savings and loan association and an assignment of the account is executed by the taxpayer or authorized individual and accepted by the bank or savings and loan association. If the business is a sole proprietorship, the savings account may be in the business name or individual’s name. If it is a partnership, the account will be jointly in the names of the partners. In the instance of a corporation, it can be in the corporation’s name with the assignment properly executed by the officer or officers with the delegated authority to sign documents for the corporation.(7-1-26)

05.Release of Security. Security which has been previously posted may be released by the Tax Commission upon receipt of a written request from the retailer if, after careful review of the circumstances, the Tax Commission determines that security is no longer needed. A request may be made one (1) year after posting the security. Security will also be released upon the retailer’s termination of its retail activities. In either case, if the Tax Commission deems necessary, an audit may be conducted prior to the release of any security.(7-1-26)

IDAPA 35.01.02.117 Refund Claims

Sections 63-3612, 63-3613, 63-3619, 63-3626, 63-3629(c), 63-3631, 63-3045, 63-3045B, 63-3049, 63-4408, Idaho Code

01.In General. An application for a refund of sales or use taxes paid in excess of the amount lawfully due will be made in accordance with the provisions of this section.(7-1-26)

02.Payment of Sales Tax by a Buyer to a Vendor. When a buyer paid sales tax to a vendor, and later determines that the sales tax was paid in error, the buyer needs to request the refund from the vendor to whom the excess tax was paid. If the buyer can provide evidence that the vendor refused to refund the tax, they may file a claim for refund directly with the Tax Commission.(7-1-26)

03.Payment of Sales or Use Tax Directly to the State. When a person holding a seller’s permit or use tax account paid tax to the state, and later determines that the sales or use tax was paid in error, they may file a claim for refund directly with the Tax Commission.(7-1-26)

04.Bad Debts. Claims for refunds arising from bad debts are to be filed with the Tax Commission in the manner prescribed by Section 063.(7-1-26)

05.Mathematical Errors. If a filer of sales or use tax returns discovers that a mathematical error was made on a previously filed return resulting in overpayment of taxes, they may submit a claim for a refund directly to the Tax Commission.(7-1-26)

06.Refund Claims. A refund claim is to be in writing and include the following information: (7-1-26)

a.Full name, address, and phone number of the claimant;(3-31-22)

b.Claimant’s seller’s permit number or use tax account number if claimant has such a number;

c.The amount of the refund claimed;(3-31-22)

d.A detailed statement of the reason the claimant believes refund is due;(3-31-22)

e.An itemized description of the specific goods or services to which the tax relates;(3-31-22)

f.The date on which the claimed excess taxes were paid;(3-31-22)

g.Documentation showing the amount of Idaho sales tax paid;(7-1-26)

h.If the claimant is the seller, documentation showing tax and interest, if applicable, has been refunded to the buyer;(7-1-26)

i.If the claim is for bad debt, detailed account payment information for each customer and each item purchased for which a refund is claimed; and(7-1-26)

j.If a refund claim doesn’t include the information listed in Subsections 117.06.a. through i., as applicable, then the claim doesn’t satisfy the requirement to file a written claim to stop the period of limitations from running. A refund claim that doesn’t include this information will be denied and processed as set out in Subsection

IDAPA 35.01.02.117 11.(7-1-26)

07.Outstanding Liabilities. No claim for refund will be approved or issued unless the claimant first satisfies outstanding liabilities for taxes administered by the Tax Commission.(7-1-26)

08.Statute of Limitations. A claim for refund won’t be allowed if it is filed more than three (3) years from the time the tax was paid. If the claim is made by a person who doesn’t hold a seller’s permit or use tax account, the time the tax was paid is the date upon which the applicable sales or use tax return relating to the payment was filed with the Tax Commission.(7-1-26)

09.Taxes Paid in Response to a Notice of Deficiency Determination. A claim for refund can’t be filed relating to any sales or use taxes which have been asserted by a notice of deficiency determination. A taxpayer contending that taxes have been erroneously or illegally collected by the Tax Commission in conformance with a notice of deficiency determination can seek a refund by using the appeal procedures outlined in IDAPA 35.02.01.320 through 328.(7-1-26)

10.Denial of a Refund Claim. All claims for refund or credit will be reviewed by the Tax Commission’s staff. If the staff concludes that all or part of the claim shouldn’t be allowed, notice of denial of the claim will be given per the Sales Tax Act.(7-1-26)

11.Interest on Refunds. See Section 122.(7-1-26)

IDAPA 35.01.02.118 Responsibility for Payment of Sales Taxes Due from Corporations,

LIMITED LIABILITY COMPANIES, AND PARTNERSHIPS. -3045, 63-3049, 63-3065, 63-3074, 63-3634, Idaho Code

01.Corporate Officers Duty to Pay Sales Tax. Individuals including corporate officers and employees with the duty to cause a corporation or a limited liability company to file a sales tax return or to pay sales tax when due, or any partnership member or employee with such duty, will become liable for payment of the tax, penalty and interest due from the corporation or partnership if they fail to carry out their duty. Any such responsible individual has the defenses, remedies, and recourse provided in Idaho Code and will be afforded notice and opportunity to be heard on the question of such liability.(7-1-26)

02.Penalty for Failure to Collect. Any individual mandated to collect, account for, and pay over any tax who willfully fails to carry out or execute their duty will have to pay, in addition to the tax, penalty, and interest, an additional amount equal to the total amount of tax involved. This penalty is in addition to all other penalties provided in Section 63-3634, Idaho Code.(7-1-26)

119.SUCCESSOR'S LIABILITY. 3628, Idaho Code

01.Making Inquiries. When a vendor sells out their business or stock of goods, the buyer is to make an inquiry of the Tax Commission and withhold from the purchase price any amount of tax that may be due until such time as the vendor, seller, produces a receipt stating that no tax is due. If the buyer fails to withhold from the purchase price the tax due, they become personally liable for the tax.(7-1-26)

02.Written Inquiry. The buyer is to make a written inquiry to the Boise Office of the State Tax Commission setting forth the following:(7-1-26)

a.The name, location, and seller’s permit number of the business they are purchasing.(3-31-22)

b.A statement that they are purchasing the business or stock of goods.(3-31-22)

c.An inquiry as to any sales or use tax liability of the business they are purchasing.(3-31-22)

03.Copy of Earnest Money. The buyer is to attach to the written inquiry a copy of any earnest money or similar agreement already entered into with the prospective seller. If no earnest money agreement has been entered into, then the seller will provide written authorization to the Tax Commission to release the information to the prospective buyer.(7-1-26)

04.Written Statement from State Tax Commission. The Tax Commission, after receiving the written inquiry from the buyer as to the amount due, will issue a written statement to the buyer setting forth the amount of tax due by the seller, if any. The Tax Commission will advise the prospective buyer only of any amount of sales or use tax that may be due to the Tax Commission under the Sales Tax Act. The release of any other information isn’t authorized. In the case that the prospective buyer requests to see the prospective seller’s sales or use tax filing record in order to determine if the business is profitable, the prospective seller is to provide a Power of Attorney appointing the prospective buyer as attorney in fact to receive confidential information regarding sales or use tax filings on behalf of the prospective seller.(7-1-26)

05.Application for Seller's Permit Number. Upon final sale, the buyer files an application Form IBR-1 for a new seller’s permit number with the Tax Commission.(7-1-26)

120.JEOPARDY DETERMINATION. 3630, Idaho Code If collection of any part of a tax is to be paid to the state, or if any determination or redetermination will be jeopardized by delay, the Tax Commission will make a determination of the tax or amount to be collected. The need for expeditious procedure and the amount of mandated security upon the assessment will be noted. The amount determined to be due to the state is immediately payable. If it isn’t paid immediately after service of notice of the deficiency, it may be recorded as a final assessment and collected by judgment processes or through use of any collection procedure available to the Tax Commission’s office. Hearings and other procedures will then proceed in accordance with the applicable procedures.(7-1-26)

IDAPA 35.01.02.121 (Reserved)

IDAPA 35.01.02.122 Interest on Deficiencies, Refunds, and Estimated Returns

Sections 28-22-104, 63-3045, 63-3630, Idaho Code

01.Interest Rate. The rate of interest on deficiencies or refunds of tax is determined annually as provided in Section 63-3045, Idaho Code, and IDAPA 35.02.01, Section 310. All interest on sales or use tax deficiencies is simple interest.(7-1-26)

02.Interest Accrual During a Period Subject to Audit.(7-1-26)

a.Signal Period. Interest on deficiencies begins to accrue from the due date of the return to which the deficiency relates. Interest on refunds begins to accrue from the due date of the return or date of payment, whichever is later.(7-1-26)

b.Multiple Periods. When a deficiency is asserted or a refund is claimed for a period of time which includes several reporting periods, interest may be averaged over the interest rate period if no substantial distortion results from the averaging technique. When averaging interest, sales or purchases of extraordinary amounts outside the usual course of business which would substantially distort the result should be excluded from the averaging calculation and interest calculated separately on such transactions. Average interest, accruing during an interest rate period, may be calculated according to the following formula:

N = Number of reporting periods in interest rate period.

R = Interest rate per reporting period, e.g., one percent (1%) for monthly filers, three percent (3%) for quarterly filers, at a 12% annual interest rate, etc.(7-1-26)

03.Alternate Formulas. Alternatively, interest may be calculated according to such other formula as the taxpayer and the Tax Commission’s sales tax audit staff may agree to apply.(7-1-26)

04.Estimated Returns. Interest on estimated returns accrues at an annual rate as provided in Section 63-3045, Idaho Code, and IDAPA 35.02.01, Section 310.(7-1-26)

05.Unpermitted Taxpayers. For the calculation of interest on a deficiency, unpermitted taxpayers are treated as monthly filers.(7-1-26)

06.Judgments. Nothing in this rule is intended to affect interest rates on judgments pursuant to Section 28-22-104(2), Idaho Code.(7-1-26)

123.ADDITIONS AND PENALTIES. -3046, 63-3075, 63-3076, 63-3077, 63-3624(i), 63-3634, Idaho Code All additions and penalties provided in Idaho Code are incorporated in the Sales Tax Act.(7-1-26)

01.Substantial Underpayment. For purposes of enforcing the substantial underpayment penalty, the term taxable year, is for purposes of the Sales Tax Act, the twelve (12) month calendar period for annual reconciliation. The returns, for purposes of such taxable year, are the returns filed under Section 105. The taxpayer’s entire calendar year or fiscal tax year is any fraction of a twelve (12) month period occurring prior to filing a final report.(7-1-26)

124.COLLECTION AND ENFORCEMENT. -3633, 63-3635, Idaho Code The rules promulgated by the Tax Commission under IDAPA 35.02.01.(7-1-26)

IDAPA 35.01.02.125 (Reserved)

IDAPA 35.01.02.126 Sales Tax Collected by the Idaho State Liquor Division

Sections 23 -105, 23-1303, 23-1001, 63-3638A, Idaho Code

01.Sales for Resale. In the case of sales to persons licensed under the provisions of Title 23, Chapter 9, Idaho Code, only those purchases for resale by an establishment licensed to sell liquor will be exempt from the tax.

If the licensee buys liquor for any purpose other than for resale, the licensee is subject to the use tax.(3-31-22)

02.Reporting. The superintendent of the Idaho State Liquor Division will forward monthly to the Tax Commission a report of all sales tax collected for the preceding month. All sales tax collected by the superintendent of the Idaho State Liquor Division and by contract private liquor stores, when the product is supplied by the Idaho State Liquor Division, will be credited directly to the liquor account, and not become a part of the sales tax account.

IDAPA 35.01.02.127 (Reserved)

IDAPA 35.01.02.128 Certificates for Resale and Other Exemption Claims

Sections 63-3612, 63-3621, 63-3622, 63-3622A - 63-3622WW, 63-3624, Idaho Code

01.In General. This section applies to proper documentation for exempt purchases of tangible Formula:

NxRR– ------------------------personal property for resale and all other exemption claims for taxable transactions enumerated in Idaho Code.

02.Burden of Proof. All sales made within Idaho are presumed to be taxable unless the seller obtains from the buyer a properly executed resale or exemption certificate. If the seller doesn’t have an exemption certificate on file, the seller will have the burden of proving that a sale isn’t taxable. The seller may overcome the presumption by establishing the facts of the exemption. If the seller obtains a properly executed certificate from the buyer, the seller need not collect sales or use taxes.(7-1-26)

03.Tax Exemption Statements. In lieu of an exemption form, when selling property that the buyer claims is entitled to the exemptions listed below, seller may stamp or imprint on the face of their sales invoices, or buyers may stamp or imprint on the face of their purchase orders, a statement containing identifying information as stated in Idaho Code, as well as the language prescribed in this section.(7-1-26)

a.This statement is to include the following identifying information: buyer’s name, buyer’s address, a federal Employer Identification Number (EIN) or driver’s license number and state of issue. Depending on the exemption claimed, the following language is to be used:(7-1-26)

i.Production or Logging Exemption.(7-1-26)

(1)The invoice, receipt, or stamp will show the purchaser’s name, business name, address, federal employer identification number or driver’s license number with state of issue, signature, date, and the reason for the claimed exemption.(7-1-26)

(2)Having the seller stamp or imprint the following statement on the face of their purchase orders, a certificate containing the following language:(3-31-22)

I certify that the property which I have here purchased will be used by me directly and primarily in the process of producing tangible personal property by mining, logging, manufacturing, processing, fabricating, or farming, or as a repair part for equipment used primarily as described above.

ii.Matter Used to Produce Heat by Burning. A tax exemption statement can be used when selling materials that the buyer claims will be used to produce heat by burning as defined in Section 088 and for which no bulk delivery is made.(7-1-26)

(1)The invoice, receipt, or stamp will show the purchaser’s name, business name, address, federal employer identification number or driver’s license number with state of issue, signature, date, and the reason for the claimed exemption.(7-1-26)

(2)Having the buyer stamp or imprint on the face of their purchase order, a statement that contains the following language:(3-31-22)

I certify that the fuel purchased will be used in a device for the purpose of domestic home use or heating an enclosed space, dwelling, or building.

Any person who signs this statement with the intention of evading payment of tax is responsible for tax due, interest and penalty.

NATURE OF BUSINESS

04.Timely Acceptance of Certificates. With the exception of Forms ST-104HM and ST-104G which is to be provided at the time of sale.(7-1-26)

a.Certificates obtained by a seller at a time subsequent to, but not within a reasonable time after, the time of sale will be considered by the Tax Commission in conjunction with all other evidence available to determine whether or not the seller has established that a sales tax transaction is exempt from tax.(7-1-26)

b.When the Tax Commission issues a Notice of Deficiency Determination to a seller, the seller may petition for redetermination as provided by IDAPA 35.02.01.320 - 328. They may submit certificates obtained from their customers as evidence of exemption claims, but only if the certificates are presented to the Tax Commission within ninety (90) days of the date of the Notice of Deficiency Determination.(7-1-26)

05.Examples. Available at Sales and Use Tax Rules Examples.(7-1-26)

129.USE OF A RECREATIONAL FACILITY AND INSTRUCTIONAL FEES. 3612(f), Idaho Code

01.Recreational Facility. Charges or fees to procure the use of a facility, facilities, or building for the purpose of recreation or physical conditioning are taxable. A recreational facility is any place where recreation occurs including outdoor locations.(7-1-26)

02.Dues. Dues paid to fraternal organizations such as the Elks, Eagles, Masonic Order, or similar organizations are not normally paid primarily for the use of facilities for recreation. In such cases, recreational use of facilities will be incidental. However, any separate, identifiable fees charged by such fraternal organizations, more than ordinary membership dues and fees, specifically for the use of recreational or physical conditioning facilities will be taxable including bowling fees, green fees, swimming fees, court fees, or equipment usage fees.(7-1-26)

03.Instructional Fees. When a class or lesson led by an instructor is offered in a recreational facility, instruction fees, such as for martial arts, aerobics, dance, and swimming are not taxable.(7-1-26)

04.Use of Tangible Personal Property. Charges imposed to use recreational facilities such as gyms, swimming pools, skating rinks, golf courses, and bowling alleys often combine the privilege of entering the place with the right to use tangible personal property. When a uniform price is imposed upon all persons without regard to the intention of the individual to use tangible personal property or the other facilities included, the total charge will be presumed a charge for the use of a recreational facility and taxable.(7-1-26)

130.PROMOTER SPONSORED EVENTS. -3620, 63-3620C, 63-3622YY, Idaho Code

01.Promoter's Responsibility. Promoters of sponsored events are to register for their event online and provide each participant with an event identification number to register for that event. The Tax Commission may request a list of participants of the event.(7-1-26)

02.Event Participants. When participants register for the event, they will state that they either have a properly executed seller’s permit, will need a temporary permit, are an Idaho small seller, or won’t be making any taxable sales at the event.(7-1-26)

03.Participant's Failure to Register for the Event. For every participant that doesn’t register for the event, the promoter is to provide a list of those participants to the Tax Commission within ten (10) days following the beginning of the event. For each participant listed, the promoter will include the following: the business name, address, phone number, and names of all individuals who own and operate the business.(7-1-26)

IDAPA 35.01.02.131 (Reserved)

133.RADIO AND TELEVISION BROADCAST EQUIPMENT. -3612, 63-3613, 63-3622, Idaho Code Businesses that provide television or radio programs only to paid subscribers are not broadcasters and cannot claim this exemption.(7-1-26)

IDAPA 35.01.02.134 (Reserved)

IDAPA 35.01.02.136 Rebates Paid to Certain Real Estate Developers

Section 63-4502, Idaho Code

01.Qualifying Shopping Center Location. A retailer with multiple stores in Idaho needs to file a separate return for any store located in a qualifying shopping center. A retailer who ceases operation in a qualifying shopping center notifies the Tax Commission and cancels the sellers’ permit for that location.(7-1-26)

02.Developer Responsibilities. The developer of a qualifying shopping center provides the names and taxpayer identification numbers of the stores located in the shopping center to the Tax Commission. The developer also notifies the Tax Commission whenever a new retailer begins operation or when a retailer ceases operations in a qualifying shopping center.(7-1-26)

IDAPA 35.01.02.137 (Reserved)

35.01.08 Mine License Tax Administrative Rules

IDAPA 35.01.08.000 Legal Authority (rule 000)

Section 63-105, Idaho Code, the State Tax Commission (Tax Commission) has promulgated rules implementing the provisi ons of the Idaho Mine License Tax Act.(7-1-24)

IDAPA 35.01.08.001 Scope (rule 001)

These rules are construed to reach the full jurisdictional extent of the state of Idaho’s authority to impose a mine license tax.(7-1-24)

IDAPA 35.01.08.002 Incorporation by Reference (rule 002)

These rules incorporate IDAPA 35.02.0 1, “Tax Commission Administration and Enforcement Rules” and all income tax rules promulgated by the Tax Commission and statutes that relate to the Mine License Tax Act.(7-1-24)

IDAPA 35.01.08.003 (Reserved)

IDAPA 35.01.08.020 Advance Royalties (rule 020)

Section 47-1201, Idaho Code Any tax arising from payments of advance royalties shall be deferred until the year during which the ore to which the advance royalty relates is actually extracted.(7-1-24)

IDAPA 35.01.08.021 (Reserved)

IDAPA 35.01.08.030 Net Value of Ore to Be Used as Measure of Tax -- How Determined (rule 030)

Section 47-1202, Idaho Code 01.

Election. The taxpayer may elect to use one (1) of the methods prescribed in Section 47-1202, Idaho Code, for the measurement of the mine license tax. This election must be made in writing and attached to the first mine license tax return filed. If no timely written election is made, the taxpayer shall be presumed to have elected to compute the mine license tax in accordance with the method described in Section 47-1202(a), Idaho Code. Once an election is made, the taxpayer may not change the method of computing their tax unless they receive written permission from the Tax Commission prior to the due date of the return.(7-1-24)

a.Taxpayers whose only taxable mining activity is receiving royalties must determine their mine license tax liability by use of the method described in Section 47-1202(a), Idaho Code.(7-1-24)

b.Taxpayers whose mining activity includes both the receiving of royalties and the extracting of ores must separately determine that portion of their mine license tax liability arising from the royalty received by using the method described in Section 47-1202(a), Idaho Code. The portion of their mine license tax liability arising from their extraction of ores may use either method for which a proper election was made. The separate determination may not be netted together or offset against each other.(7-1-24)

02.Method Under Section 47-1202(a). For taxpayers receiving royalties, gross royalties shall be reduced by the deduction for depletion expense on the royalty that was allowed in the taxpayer’s federal income tax return.(7-1-24)

03.Method Under Section 47-1202(b). In addition to requirements under Section 47-1202(b), the net value of ores mined shall include the computations in Subsections 030.03.a. and 030.03.b.(7-1-24)

a.The value used under 47-1202(b) shall apply regardless of whether the ore is extracted from public, tribal, or private land. If the taxpayer is mining properties for which a royalty must be paid, the taxpayer must attach to the mine license tax return a copy of the value determination made by the U.S. Department of the Interior.(7-1-24)

b.The taxpayer shall also deduct a portion of the depletion expense attributable to the property that was allowed as a deduction in the taxpayer’s federal income tax return for the same taxable year. The deductible portion shall be determined by multiplying the depletion expense allowed on the federal income tax return by the ratio of the gross value of ores for mine license tax purposes to the gross value of ores for federal percentage depletion purposes. For purposes of this computation, all references to gross value and depletion expense shall be limited to those arising from mining conducted in Idaho.(7-1-24)

IDAPA 35.01.08.031 (Reserved)

IDAPA 35.01.08.040 Mine License Tax Returns (rule 040)

Section 47-1203, Idaho Code A valid return needs to be filed as provided in Rule 150 of the Tax Commission Administration and Enforcement Rules, and include a schedule listing the name, address, and employer identification number or social security number, of each recipient of royalties paid by the taxpayer filing the return. The royalties shall be separately stated for each mining operation. Each mine license tax return shall also include a copy of the depletion expense computation applicable to Idaho mining properties that was included in the taxpayer’s federal income tax return.(7-1-24)

IDAPA 35.01.08.041 (Reserved)

35.01.09 Idaho Beer and Wine Taxes Administrative Rules

IDAPA 35.01.09.000 Legal Authority (rule 000)

Sections 63-105, 23-1051, 23-1323, Idaho Code, authorize the State Tax Commission (Tax Commission) to adopt the provisi ons of the Idaho Beer Act and the Idaho County Option Kitchen and Table Wine Act (the Acts).(4-6-23)

IDAPA 35.01.09.001 Scope (rule 001)

These rules are to be construed to reach the full jurisdictional extent of the state of Idaho’s authority to impose a tax on:(4-6-23)

a.All barrels or fractional amounts of beer sold or disposed of by a wholesaler and used or consumed in Idaho.(4-6-23)

b.All gallons of wine sold or disposed of by a distributor and used or consumed in Idaho.(4-6-23)

IDAPA 35.01.09.002 (Reserved)

IDAPA 35.01.09.010 Definitions (rule 010)

Sections 23-1001, 23-1303, Idaho Code Definit ions provided by statute, including the definitions in Sections 23-1001 and 23-1303, Idaho Code, apply to these rules. The following definitions apply for the purpose of these rules.(4-6-23)

01.Disposition. A disposition is any decrease of beer or wine from inventory due to any sale, transfer, loss, breakage, spoilage or any other cause or means.(4-6-23)

02.Taxpayer. A taxpayer is a person liable to report and pay the beer tax or wine tax according to the Acts and these rules.(4-6-23)

03.Wine Direct Shipper. A wine direct shipper is a winery that has been issued a permit by the Idaho State Police to ship wine directly to residents of Idaho.(4-6-23)

IDAPA 35.01.09.011 Beer and Wine Sales Subject to Tax (rule 011)

Sections 23-1001, 23-1003, 23-1006, 23-1008, 23 -1303, 23-1309A, 23-1314, 23-1319, Idaho Code

01.In General. Sections 23-1008 and 23-1319, Idaho Code, impose an excise tax on beer sales by beer wholesalers and wine sales by wine distributors for use or consumption in Idaho.(4-6-23)

a.Every disposition of beer by a wholesaler or wine by a distributor to a retailer or consumer constitutes a sale for resale or use. Beer wholesalers or wine distributors are liable for the payment of taxes on the sales. Any person making sales or dispositions of beer or wine, whether licensed or not, is liable for the taxes.

b.Wine direct shippers are liable for payment of wine tax imposed by Chapter 13, Title 23, Idaho Code, as well as the sales and use taxes imposed by Chapter 36, Title 63, Idaho Code, on all shipments of wine to Idaho.(4-6-23)

c.Any brewer, brewery, producer, or manufacturer of beer within Idaho will be considered a beer dealer within the meaning of the definitions provided in Section 23-1001(f), Idaho Code. However, to ensure payment of tax on beer, any entity holding a brewery license will be considered a wholesaler to the extent of any disposition from the brewery for the purpose of resale or consumption in, by, or through any retail facilities including, tasting rooms on or near the brewery’s premises.(4-6-23)

d.Any vintner, winery, producer, or manufacturer of wine within Idaho will be considered a wine importer within the meaning of the definitions provided in Section 23-1303(1)(g), Idaho Code. However, to ensure payment of tax on wine, any entity holding a winery license will be considered a distributor to the extent of any disposition from the winery for the purpose of resale or consumption in, by, or through any retail facilities including, tasting rooms on or near the winery’s premises.(4-6-23)

e.Ales, beer, new beer, or any alcoholic beverage that meets the definition in Section 23-1001(a), Idaho Code, containing more than five percent (5%) alcohol by volume are imposed an excise tax by Section 23- 1008(1), Idaho Code.(4-6-23)

f.Premixed cocktails with an alcoholic content of fourteen percent (14%) or less by volume are taxed at the wine tax rate.(4-6-23)

g.Illegal Sales or Dispositions. In addition to the remedies of Sections 23-1055 and 23-1309, Idaho Code, the Tax Commission may assess taxes against persons making illegal sales of beer or wine who otherwise would be liable for payment of taxes.(4-6-23)

02.Supplementing Inventory. If a brewery or winery supplements inventory, adequate records are required to support any tax paid. The Tax Commission will presume no tax is paid on beer or wine in the inventory of a brewery or winery without evidence of the payment of tax. Wineries are not supplementing their inventory when purchasing wine or grape juice from other wineries to blend and produce wine.(4-6-23)

03.All Sales Presumed Taxable. Every sale or disposition from inventory is presumed to be a taxable sale unless the sale or disposition is exempt from tax by the Acts or these rules.(4-6-23)

IDAPA 35.01.09.012 Exemptions (rule 012)

Sections 23-1048, 23-1051, 23-1319, 23-1323, Idaho Code Burden of Proof. The burden of proving any exemption, deduction, credit, or refund allowed by the Acts and these rules is upon the person claiming it.(4-6-23)

02.Wholesale Exports. Every resale of beer or wine by a beer wholesaler, brewery, wine distributor, or winery for the purpose of and resulting in an export of beer or wine from this state for resale outside this state is exempt from beer or wine tax.(4-6-23)

03.Sales By Wine Direct Shippers Outside This State. When an Idaho wine direct shipper is licensed as a wine direct shipper in another state, they are licensed to sell wine to residents of the other state. Sales of wine by the Idaho wine direct shipper, using another state’s wine direct shipper license, to a resident of that state and delivered to a location in that state are exempt from Idaho wine tax.(4-6-23)

04.Sales to Purchasers on Military Reservations. Sales to authorized purchasers on military reservations for the purpose of and resulting in sales or consumption on the reservation are exempt from beer or wine

tax.(4-6-23)

05.Sales to Idaho State Liquor Dispensary. Sales of beer or wine to the Idaho State Liquor Dispensary are exempt from beer or wine tax.(4-6-23)

06.Dispositions From One Distributor or Wholesaler to Another. Any disposition of beer or wine by transfer or sale or any other means from one (1) distributor or wholesaler to another is exempt from beer or wine

tax.(4-6-23)

IDAPA 35.01.09.013 Breakage or Spoilage (rule 013)

Sections 23-1051, 23-1319, Idaho Code Percentage Method. When a beer or wine container is damaged, contents spoiled, or is otherwise unfit for sale, the beer wholesaler or wine distributor may claim a percentage deduction of their total inventory purchases during the reporting period when the breakage or spoilage occurred. The taxpayer may claim a deduction without prior written approval when adequate records are maintained to verify actual breakage or spoilage. The maximum percentage deductions are one-half of one percent (0.50%) for beer and three-quarters of one percent (0.75%) for wine.(4-6-23)

a.The Tax Commission may revoke the use of the percentage method for any taxpayer at any time.

The Tax Commission will notify the taxpayer in writing that future destructions of breakage or spoilage will require written approval from the Tax Commission.(4-6-23)

b.Any taxpayer who has received written notice revoking the percentage method must file the destruction request form required by the Tax Commission.(4-6-23)

02.Reporting Destruction or Spoilage. Taxpayers will report the destruction or spoilage in the manner and form required by the Tax Commission when claiming breakage or spoilage exceeding the maximum percentages allowed or the Tax Commission revokes the percentage method.(4-6-23)

03.Deduction for Breakage or Spoilage. A deduction may be claimed by the taxpayer for breakage or spoilage when reporting beer or wine tax due.(4-6-23)

IDAPA 35.01.09.014 Financial Security (rule 014)

Sections 23-1049, 23-1320, Idaho Code

01.Financial Security for Payment of Tax. Any person required to pay tax under the Acts must have an acceptable amount of security on file and in acceptable form with the Tax Commission unless excused or waived by the Tax Commission. The security is conditioned upon payment of all taxes imposed on beer or wine by this state for which the person is liable, including any penalty and interest.(4-6-23)

02.Security for a New Taxpayer. When a new taxpayer applies for a tax account the security required is one thousand dollars ($1,000) unless one of the following conditions applies:(4-6-23)

a.If a beer or wine tax reporting history is available from a previous ownership, the security required may be based on the most recent twelve (12) month filing history of the prior ownership.(4-6-23)

b.If an out-of-state wine direct shipper is applying for an initial account, they may request a bond waiver.(4-6-23)

c.If the taxpayer can establish a lesser amount should apply based on the average monthly amount payable according to Section 23-1049, Idaho Code.(4-6-23)

IDAPA 35.01.09.015 Beer or Wine Tax Accounts (rule 015)

Sections 23-1051, 23-1323, Idaho Code Tax Accounts. Before engaging in business, taxpayers need to have a beer tax or wine tax account from the Tax Commission to report and pay tax. As evidence of the tax account, a tax permit is issued. The terms tax account and tax permit are used interchangeably in this section.(4-6-23)

02.Tax Accounts Are Non-transferable. Where there is a change of ownership, it is the responsibility of the tax account holder to cancel the tax account by giving written notice to the Tax Commission.(4-6-23)

a.Notice requirements include the date of closure or last date of operation, date of sale or lease, and the name of the new owner or lessee.(4-6-23)

b.If the new owner or lessee uses the previous owner’s tax account, the registered tax holder may be responsible for all tax, penalty, and interest incurred during that period.(4-6-23)

03.Tax Account Cancellation. The Tax Commission may cancel an inactive tax account. A tax account is considered inactive when returns are filed with no reportable beer or wine activity for twelve (12) consecutive months. The Tax Commission will provide notice of cancellation to the last known address of the tax account holder.(4-6-23)

IDAPA 35.01.09.016 Beer or Wine Tax Returns (rule 016)

Sections 23-1047, 23-1051, 23-1322, 23-1323, Idaho Code Reporting Periods. Returns are due on or before the 15th day of the month following the end of the reporting period, or the next business day when the due date is a Saturday, Sunday, or legal holiday. All returns must be filed monthly unless the Tax Commission approves an alternate reporting period.(4-6-23)

a.Request to File Quarterly or Semiannually. Taxpayers owing six hundred dollars ($600) or less per quarter with a timely filing and payment history may request a quarterly or semiannual reporting period.(4-6-23)

b.Request to File Annually. Wine direct shippers, taxpayers with seasonal activities, and other taxpayers with minimal activity may request an annual reporting period.(4-6-23)

c.Final Return. A taxpayer will mark cancel on the last return filed. Tax, penalty, and interest will apply if the taxpayer continues business activity after filing a final return and canceling the tax account.(4-6-23)

02.Prescribed Forms. All sales or other dispositions of beer or wine in Idaho must be reported on forms provided or approved by the Tax Commission.(4-6-23)

03.Inventory Reporting. Taxpayers, excluding out-of-state direct shippers, are to report all additions to and sales or dispositions out of inventory, whether taxable or tax exempt.(4-6-23)

04.Requirements of a Valid Return. A valid return includes the fully completed and signed tax return. The return must meet the requirements of these rules and the information must be legible.(4-6-23)

IDAPA 35.01.09.017 (Reserved)

IDAPA 35.01.09.019 Records Required (rule 019)

Sections, 23-1006, 23-1051, 23-1314, 23-1323, Idaho Code In General. Every person liable for the payment of taxes on beer or wine must keep and preserve the following records:(4-6-23)

a.A daily record of all cash and credit sales including invoices, receipts, journals, and other related records.(4-6-23)

b.A record of the amount of all merchandise purchased, including all bills of lading, invoices, sales receipts, bank statements, canceled checks, and copies of purchase orders arranged in numerical and chronological order.(4-6-23)

c.Supporting documents for all deductions and exemptions allowed by law or claimed on a tax return.

d.True and complete physical counts of the beer and wine inventory taken at the end of each reporting period.(4-6-23)

e.True and complete records of breakage and spoilage claimed as a deduction from inventory.

f.Any records used to complete a return, including but not limited to those listed above, are to be kept in numerical and chronological order so they can be balanced with the corresponding return.(4-6-23)

02.Record Retention. These records are to be kept for a minimum of four (4) years. If a taxpayer appeals an assessment, all records are to be legible and kept on the business premises until final disposition of the appeal.(4-6-23)

IDAPA 35.01.09.020 (Reserved)

35.01.07 Kilowatt Hour Tax Administrative Rules

IDAPA 35.01.07.000 Legal Authority

In accordance with Sections 63-105 and 63-2701, Idaho Code, the Tax Commission has promulgated rules implementing the provisions of the Idaho Kilowatt Hour Tax Act. The rules relating to the administration and enforcement of kilowatt hour taxes, as well as other taxes, are promulgated as IDAPA 35.02.01.(3-31-22)

IDAPA 35.01.07.001 Scope

These rules are construed to reach the full jurisdictional extent of the state of Idaho’s authority to impose a tax on producers of electricity from hydroelectric generation.(3-31-22)

IDAPA 35.01.07.002 Administrative Appeals

This chapter allows administrative relief as provided i n Sections 63-3045, 63-3045A, 63-3045B, and 63-3049, Idaho Code. (3-31-22)

IDAPA 35.01.07.003 (Reserved)

IDAPA 35.01.07.010 Definitions

01.Idaho Customer. Idaho customer means a customer who has a point of delivery for the transfer of power and energy that is located in Idaho. This includes wholesale power transactions with customers or wheeling agents that have a delivery point located in Idaho.(3-31-22)

02.Point of Delivery. Point of delivery means the point at which a change in ownership of electrical facilities occurs between the filing party and the wholesale customers or wheeling agents for the transfer of power and energy.(3-31-22)

03.Wheeling Agent. Wheeling agent means an entity that receives kilowatt hours from a source or sources of supply and makes power or energy available at another point on its system for a delivering entity or a third party.(3-31-22)

IDAPA 35.01.07.011 (Reserved)

IDAPA 35.01.07.020 Electrical Producers Subject to Tax

Section 63-2701, Idaho Code The tax does not apply to power generated by facilities owned and operated by a municipal corporation organized pursuant to the laws of Idaho. Municipal corporations are not required to file kilowatt hour tax returns or to pay tax.

As used in these rules, the term municipal corporation does not include a producer, as defined in Section 63-2701, Idaho Code, who produces electricity pursuant to a contract with a governmental entity.(3-31-22)

IDAPA 35.01.07.021 (Reserved)

IDAPA 35.01.07.030 Kilowatt Hour Tax Returns

Section 63-2701, Idaho Code 01.

Monthly Returns. All producers whose previous year’s annual tax liability was greater than fifteen thousand dollars ($15,000) must file a monthly return with the Tax Commission no later than the last day of the month following the month to which the return relates.(3-31-22)

02.Quarterly Returns. Producers whose previous year’s annual tax liability was equal to or less than fifteen thousand dollars ($15,000) may, at the discretion of the Tax Commission, be allowed to file a quarterly return with the Tax Commission no later than the last day of the month following the end of the calendar quarter to which the return relates. When a filing cycle is changed, the change will take effect on January 1 of the following year.

(3-31-22)

03.Previous Year’s Annual Tax Liability. If the previous year’s annual tax liability is not available, the estimated current year’s liability may be used.(3-31-22)

IDAPA 35.01.07.031 (Reserved)

IDAPA 35.01.07.045 Exemptions

Section 63-2705, Idaho Code

01.Wheeled Energy.(3-31-22)

a.If the taxpayer is a wheeling agent for another entity, the wheeled energy may not be included in the calculation of the exemptions.(3-31-22)

b.Example. Assume that Company A sells kilowatt hours to Company B and delivers this energy to Company C for wheeling and delivery to Company B at an Idaho delivery point. Company C, as a wheeling agent, would not include these kilowatt hours in the denominator of the percentage to be applied to the exempt sales.

Company A would include these kilowatt hours in the denominator of the percentage to be applied to the exempt sales if the transfer between Companies A and C was at a delivery point in Idaho.(3-31-22)

IDAPA 35.01.07.046 (Reserved)

35.01.06 Hotel/Motel Room and Campground Sales Tax Administrative Rules

IDAPA 35.01.06.000 Legal Authority

Sections 63-105, 67-4718, and 67-4917B, Idaho Code.(7-1-26)

IDAPA 35.01.06.001 Scope

These rules are construed to reach the full juris dictional extent of the state of Idaho’s authority for taxes imposed on providing accommodations.(7-1-26)

IDAPA 35.01.06.002 Lodging Operators and Short-Term Rental Marketplaces

Sections, 63-180 1 through 63-1804, 63-3612, 63-3620, 67-4711, 67-4718, 67-4917B, Idaho Code

01.Applicable Taxes. Any state or local government taxes imposed will be collected, reported, paid, and administered according to these rules or as further explained by the Tax Commission’s rules in IDAPA 35.01.02.

02.Registration. Registration with the Tax Commission will be in the same manner as obtaining a seller’s permit for state sales tax. Idaho requires businesses to register for certain tax permits using the Idaho Business Registration (IBR) process. These permits include seller’s permits for sales and use taxes, travel and convention permits, and some auditorium district permits.(7-1-26)

IDAPA 35.01.06.003 (Reserved)

IDAPA 35.01.06.010 Definitions

Section 67- 4711, Idaho Code

01.Campground. Campground means a person, partnership, trustee, receiver, or other association, regularly engaged in the business of renting, for a consideration, or which holds itself out as being in the business of renting, for a consideration, any area, space or place for camping, parking campers, travel trailers, motor homes or tents when such areas, spaces or places are to be rented for the purpose of providing an individual or individuals a place to sleep.(3-31-22)

02.Hotel or Motel. The words hotel or motel means any person, partnership, corporation, trustee, receiver, or other association, regularly engaged in the business of furnishing rooms for use or occupancy, whether personal or commercial, in return for consideration or which holds itself out as being regularly engaged in such business. Providing rooms for consideration includes rooms rented for personal occupancy and rooms rented for meetings, conventions, or other commercial purposes.(7-1-26)

IDAPA 35.01.06.011 Accommodations Tax

Sections 5 0-1046, 63-3612, 67-4711, 67-4718, 67-4902, 67-4917B, 67-4917C, 63-1801 through 63-1804, Idaho Code

01.In General. These rules apply to:(3-31-22)

a.Room Sales Tax. The room sales tax includes Travel and Convention Tax and Auditorium or Community Center District Tax when those taxes are administered by the Tax Commission. In these rules, they are referred to collectively as the room sales tax:(3-31-22)

i.Travel and Convention Tax. The tax imposed by Section 67-4718, Idaho Code, is a sales tax on providing a place to sleep to an individual by operators of hotels, motels, and campgrounds as defined in these rules.

ii.Auditorium or Community Center District Tax. The tax imposed by Section 67-4917B, Idaho Code, is a retail sales tax levied upon the user or occupant of a hotel/motel room collected by the hotel or motel from the occupant or user and remitted to the Tax Commission.(7-1-26)

b.Sales Tax for Accommodations. These rules explain the application of the state sales tax on accommodations. See also IDAPA 35.01.02.028.(7-1-26)

IDAPA 35.01.06.012 Room or Campground Charge Defined

Section 63-3619, Idah o Code

01.Room or Campground Charge Definition. The charge for providing rooms or campground spaces is to the total paid, whether in money or otherwise, for the rental of the room or space. This includes all services agreed to be rendered unless exempted in Idaho Code, including cleaning fees, booking fees, and amounts charged for temporary use of tangible personal property used in conjunction with the room such as a charge for an extra bed. In the case of campgrounds any charges for water, electrical or sewer hookups are part of the charge for the use of the space and are included in the amount subject to tax.(7-1-26)

02.Not Included. Separately stated charges that are not part of the rental of the room or campground space. include separately stated charges for internet access, telephone, food, beverage or laundry charges.(7-1-26)

IDAPA 35.01.06.013 Separately Stated Tax

Section 63-3619, Idaho Code

01.Amount of Tax Charged. The total tax charged for lodging accommodations needs to be separately stated from all other charges on the customer’s receipt and can appear on the receipt as either;(7-1-26)

a.A separate line item for each of the applicable taxes.(7-1-26)

b.A single line item that includes all applicable taxes.(7-1-26)

014.EXEMPTIONS. -3612(g), 63-3622A, 63-3624, 63-3622O, 67-4718, 67-4917B, 67-4917C, 63-1804, Idaho Code

01.Exemptions. All charges for accommodations which are exempt from Idaho sales tax are also exempt from the room sales tax.(7-1-26)

02.Exempt Entities. Rooms or campground spaces furnished to exempt entities, as defined in Section 63-3622O, Idaho Code, are exempt from the taxes if and only if the charge for the accommodation is billed directly to and paid directly by those entities.(7-1-26) a.“Billed directly to” means a contractual agreement between the facility operator and the exempt entity whereby the charge for the accommodation is directed, and is the responsibility of, and paid by the.(7-1-26) b.“Paid directly by” means a remittance tendered directly by the exempt entity to the facility operator.

It does not include payment by the exempt entity or institution to an employee or agent for reimbursement of expenses incurred during business travel. However, “paid directly by” does include payments made by an exempt entity to a financial institution for credit card charges made on a charge account in the name of the exempt entity with a credit card issued to the entity itself and not to any individual or employee.(7-1-26)

c.Credit cards issued to employees of governmental agencies aren’t considered to be billed directly to and paid directly by the governmental entity when the employee is responsible for making payment to the credit card company.(7-1-26)

03.Continuous Occupancy Exemptions. All accommodations are presumed to be short-term unless evidence can be provided documenting continuous occupancy. Continuous occupancy means maintaining residency under the terms of a lease or similar agreement for a continuous period of thirty one (31) days or greater by the same individual or individuals. The continuous occupancy exemption does not apply when the accommodation is furnished to a business enterprise that rotates numerous employees as occupants of the room or space with no one (1) employee remaining continuously for the minimum number of days required to meet the continuous stay requirements.(7-1-26)

04.Rooms Rented for Purposes Other Than Sleeping. Travel and Convention tax applies only to rooms rented to an individual as a place to sleep. The tax does not apply to rooms rented for other purposes, such as for meetings. However, both the state sales tax and the Auditorium or Community Center District tax apply to rooms rented by a hotel or motel for purposes other than sleeping. Rooms supplied with beds are presumed to be rented for the purpose of sleeping unless the contrary is established by the operator. Rooms, other than dormitory rooms, rented by an educational institution for purposes other than sleeping, are not taxable as a sale of lodging; however, it is possible that renting such a room may be taxable as a fee for the privilege of using a facility for a recreational purpose.(3-31-22)

05.Campgrounds Exempted. The Auditorium or Community Center District tax doesn’t apply to campground charges. The state sales tax and the Travel and Convention tax apply to the charge for campground spaces. Sales of spaces in campgrounds owned or operated by the state of Idaho, its agencies or political subdivisions are subject to the state sales tax but not the Travel and Convention tax.(7-1-26)

06.Foreign Diplomats. The United States Government grants immunity from state taxes to diplomats from certain foreign countries. The diplomat is issued a federal tax exemption card by the U.S. Department of State.

The card bears a photograph of the holder, a federal tax exemption number, and specific instructions as to the extent of the exemption granted to the diplomat. Vendors document an exempt charge to a foreign diplomat by:(3-31-22)

a.Retaining a photocopy of the front and back of the federal tax exemption card; or(3-31-22)

b.Recording for their permanent record the name of the bearer, the mission represented, the federal tax exemption number displayed on the card, the date of expiration, and the nature of the exemption granted to the diplomat.(3-31-22)

07.Direct Pay Authority. A taxpayer granted direct pay authority, as provided by IDAPA 35.01.02.112, may not use this authority as an exemption from accommodation taxes.(7-1-26)

015.RECORDS RETENTION. -3622, 63-3624, 67-4711, 67-4718, 67-4917C, Idaho Code Any person that provides accommodations will maintain records described in IDAPA 35.01.02 Section 111, and the records and exemption certificates required in IDAPA 35.01.06.014 necessary to document exemptions from the accommodations tax. These records are to be maintained for a period of four (4) years and are subject to audit by the Tax Commission or, Auditorium or Community Center Districts.(7-1-26)

016.DEFICIENCIES, COLLECTIONS, AND ENFORCEMENT. -3629, 63-3634, Idaho Code

01.Remittance of Taxes. In the event that taxes required to be collected and remitted by a hotel, motel, campground, lodging operator, and short-term rental marketplace are not remitted to the Tax Commission together with a return in a timely manner or in the event that the Tax Commission finds any deficiency in the amount of tax reported to or remitted to the Tax Commission, the Tax Commission will issue a Notice of Deficiency Determination. A hotel, motel, campground, lodging operator, and short-term rental marketplace to which such a Notice of Deficiency Determination has been issued may file a written protest requesting a redetermination of the deficiency pursuant to the provisions of IDAPA 35.02.01.320 - 328, “Tax Administration and Enforcement Administrative Rules.”(7-1-26)

02.Penalties. In the event that any deficiency in reporting or remitting taxes by a hotel, motel, campground, lodging operator, and short-term rental marketplace is due to negligence, failure to comply with this Tax Commission’s rules, or fraud, or in the event that any hotel, motel, campground, lodging operator, and short-term rental marketplace required to file a return with the Tax Commission fails to do so, the penalties provided in the Idaho Income Tax Act as applicable to the Idaho Sales Tax Act applies to the room sales tax. See IDAPA 35.01.01.

IDAPA 35.01.06.017 Sales Tax Rules Apply Unless Otherwise Provided (rule 021)

Sections 67 -4710 - 67-4719, 67-4917A, 67-4917B, 67-4917C, Idaho Code Tax Commission rules in IDAPA 35.01.02, relating to the enforcement and collection of the Idaho sales tax, apply to the room sales tax unless provisions in Idaho Code conflict.(7-1-26)

IDAPA 35.01.06.018 (Reserved)

35.01.05 Idaho Motor Fuels Tax Administrative Rules

IDAPA 35.01.05.000 Legal Authority

Sections 63-105(2), 63-2427, 40-312 and 41-4909, Idaho Code.(7-1-25)

IDAPA 35.01.05.001 Scope

These rules are construed to reach the full jurisdictional extent of the state of Idaho’s authority to impose:(7-1-25)

a.Motor Fuels Tax. A motor fuel tax on each gallon of motor fuel received and on the use of or other consumption of motor fuel in this state. This also includes the administration of the International Fuel Tax Agreement (IFTA).(7-1-25)

b.Transfer Fee. A transfer fee upon each gallon of petroleum or petroleum products received and subject to the transfer fee as authorized by Title 41, Chapter 49, Idaho Code.(7-1-25)

c.Registration Records. Record requirements for International Registration Plan (IRP) and Idaho Full Fee registration audits authorized by Title 49, Chapter 4, Idaho Code.(7-1-25)

IDAPA 35.01.05.002 Incorporation by Reference

Sections 63-2434, 63-2442A, 41-4909, 49-439, Idaho Code IFTA. These rules incorporate the applicable IFTA governing documents: the IFTA Articles of Agreement, the IFTA Procedures Manual, and the IFTA Audit Manual. The IFTA governing documents are equally binding on all IFTA member jurisdictions and licensees, including motor fuels users licensed or obligated to be licensed to operate under an Idaho IFTA license. These documents can be found on the IFTA website at http:// www.iftach.org.(7-1-25)

02.IRP. These rules incorporate the applicable IRP governing documents: the Plan and IRP Audit Procedures Manual. The documents are included to aid the Tax Commission in complying with IRP registration application audits authorized in Title 49, Chapter 4, Idaho Code. These documents can be found on the IRP website at http://www.irponline.org.(7-1-25)

IDAPA 35.01.05.003 (Reserved)

IDAPA 35.01.05.010 Definitions

Section 63-2401, Idaho Code Commercial Motorboat. A commercial motorboat includes a motorboat used in a business that rents boats to others who use the boats for pleasure.(7-1-25)

02.Tribal-Owned Retail Outlet. A tribal-owned retail outlet is:(7-1-25)

a.Located within the boundaries of a federally recognized American Indian reservation; and (7-1-25)

b.Owned and operated by an enrolled member of, or an enterprise owned by:(7-1-25)

i.The Coeur d’Alene, Kootenai, Nez Perce, Shoshone/Bannock, or Shoshone/Paiute tribe.(7-1-25)

IDAPA 35.01.05.011 (Reserved)

IDAPA 35.01.05.110 Calculation of Motor Fuels Tax on Gaseous Special Fuels

Section 63-2424, Idaho Code Selling Gaseous Special Fuel. A gaseous special fuel may be sold at volumes or weights other than those listed in this section. It is mandatory for distributors and consumers, paying tax or claiming refunds, to use Tax Commission prescribed volumes and weights when reporting.(7-1-25)

02.Computing Gaseous Special Fuel Tax Equivalents. Computation is made by multiplying the percentage of gasoline gallon energy equivalent times the current gasoline tax rate for each type of gaseous special fuel.

IDAPA 35.01.05.111 (Reserved)

IDAPA 35.01.05.130 Distributor's Fuel Tax Reports

Sections 63-2406, 63-2407, 63-2408, 41-4909, Idaho Code

01.Timely Reporting. Any motor fuel and other petroleum product shipments that are:(3-31-22)

a.Reported on a timely supplemental report are subject to interest but not subject to penalty. (7-1-25)

b.Not reported on a timely monthly or supplemental report are subject to interest and may be subject to penalty.(7-1-25)

02.Motor Fuels Receipts. All gasoline, natural gasoline, gasoline blend stocks, ethanol, ethanol blended fuels, aircraft engine fuel, biodiesel, biodiesel blends, undyed diesel fuel, or other special fuels received by a distributor are subject to the fuels tax and transfer fee. All receipts of dyed diesel fuel and other petroleum products that are not subject to the special fuels tax are subject to the transfer fee. The special fuels tax is not imposed on gaseous fuels when the fuels are received. Refer to Sections 132 and 137 of these rules for the taxation and reporting of gaseous fuels used in motor vehicles.(7-1-25)

03.Motor Fuels and Other Petroleum Products Presumed to be Distributed. Unless the contrary is established, it is presumed that all motor fuels and other petroleum products imported into this state by a distributor, which are no longer in the possession of that distributor, have been distributed. If the licensed distributor has returned to the refinery or pipeline terminal motor fuels and other petroleum products on which the tax and transfer fee has been paid or has had an accidental loss, the licensed distributor has the burden of showing the petroleum products were returned to the refinery or pipeline terminal or documenting the accidental loss. No refund of the transfer fee is allowed for accidental losses of motor fuels or other petroleum products.(3-31-22)

04.Exported Fuel. Motor fuels or other petroleum products claimed as exported from Idaho are obligated to have supporting records that include the following:(7-1-25)

a.Tax reports or other evidence that will verify that the exported product was reported to and any tax due was paid to the jurisdiction into which the product was claimed to have been exported or evidence that the purchaser is a licensed distributor in the jurisdiction to which the exported product is destined; and(3-31-22)

b.Common carrier shipping documents, bills of lading, manifests, and cost billings; or(3-31-22)

c.Invoices, manifests, bills of lading or other documentation, signed by the receiving party to acknowledge receipt of the product; or(3-31-22)

Motor Fuel BTUs per Gallon or Gallon Equivalent Equivalent Volume or Weight/Mass Percentage of Gasoline Gallon Energy Equivalent Gasoline127,0001 gallon 100% Propane92,000 4.25 lbs. or 1 gallon 72.44% Compressed Natural Gas (CNG) 127,000 per GGE5.66 lbs.100% Liquefied Natural Gas (LNG) 138,400 per DGE6.06 lbs.108.98% Hydrogen127,000 per GGE1 kg.100%

d.Accounts payable or receivable information for verifying payments to common carriers or payment by out-of-state parties to verify receipt of exported product.(3-31-22)

e.In addition to the above, for a licensed distributor who maintains operations in Idaho, as well as other jurisdictions, evidence such as product inventory and transfer records will be retained to prove the transfer of product out of Idaho.(7-1-25)

IDAPA 35.01.05.131 Filing Motor Fuels Distributor Reports Electronically

Section 63-2406, Idaho Code Electronic Filing. A motor fuels distributor who reports twenty-five (25) or more total receipts and disbursements of motor fuels on its monthly distributor report will file the distributor report electronically. (7-1-25)

02.Not Reporting Electronically. A motor fuels distributor who is mandated to file its distributor report electronically, but does not, is treated as if they did not file the monthly report.(7-1-25)

03.Waiver of Mandatory Electronic Reporting. A motor fuels distributor can request a waiver of the mandatory electronic reporting by showing that the cost to comply with this rule is unreasonable. The Tax Commission will review each request for waiver and issue a determination.(7-1-25)

IDAPA 35.01.05.132 Licensed Gaseous Special Fuels Distributor’s Reports

Section 63-2424, Idaho Code Receipt of Gaseous Fuels. The motor fuels tax is not imposed on gaseous special fuels when the fuels are received, as defined in Section 63-2403, Idaho Code. Propane and natural gas are presumed to be taxexempt fuels unless delivered into the main supply tank of a licensed, or required to be licensed, motor vehicle.

02.Documentation of Exempt Sales of Gaseous Special Fuels Delivered into Motor Vehicles.

Gaseous special fuels delivered into the fuel supply tank of a licensed, or required to be licensed, motor vehicle are taxable except for:(3-31-22)

a.Government. Gaseous special fuels used by vehicles owned or leased, and operated by the federal government, or by an instrumentality of the state of Idaho, including all its political subdivisions, are exempt from the motor fuels tax on gaseous special fuels. The distributor will record the name of the governmental entity, the license or identification number of the vehicle, and the type of vehicle on the sales document.(7-1-25)

b.Manned and Unmanned Stations. A manned station will have a representative at the point of sale to visually inspect the vehicle in order to make exempt sales of gaseous special fuels. Exempt sales of gaseous special fuels from an unmanned station are allowed when each sale is recorded by other visual means. When a distributor cannot meet the previous two requirements, it will request approval from the Tax Commission before making exempt sales of gaseous special fuels.(7-1-25)

IDAPA 35.01.05.133 (Reserved)

IDAPA 35.01.05.137 Tax Reports

Sections 63-2406, 63-2407, 63-2408, 63-2424 , 63-2437, 41-4909, Idaho Code

01.Monthly Reports. Every licensed distributor (motor fuels and gaseous), instate pipeline terminal operator, and production terminal operator will file with the Tax Commission a monthly tax report using gross gallons or equivalents from Section 110 of these rules. The report will have such information, on the forms and in the manner prescribed by the Tax Commission, including supporting detailed schedules. All distributors and terminal operators will keep detailed inventory records. Along with the quantity of motor fuels and other petroleum products received during the month, the motor fuels distributors and terminal operators will include a listing of each person from inside or outside Idaho supplying motor fuels and other petroleum products to the distributor, pipeline terminal, or production terminal. Tax reports will contain a declaration by the person filing the report that the statements contained therein are true and are made under penalties of perjury.(7-1-25)

02.Machine Tabulated Data. Machine tabulated data is accepted in lieu of detailed schedules on Tax Commission provided forms, but only if the data is in the same format as shown on the required schedules. Before any other format may be used, the distributor or terminal operator will make a written request with a copy of the format and receive written authorization to use that format from the Tax Commission.(7-1-25)

03.Report and Payment Due. The report is due on or before the last day of the month following the month to which the report relates, together with the payment of any tax, penalty, or interest due.(7-1-25)

04.Failure to Pay Tax. Any distributor responsible for paying the tax imposed by Section 63-2424, Idaho Code, who does not pay such tax is liable to the Tax Commission for the amount not paid plus any applicable penalty, interest, or both. The Tax Commission may collect such amounts in the manner provided in Section 63-2434, Idaho Code.(7-1-25)

IDAPA 35.01.05.138 (Reserved)

IDAPA 35.01.05.141 Fuel Distributor Credit and Refund Claims

Fuel Distributor Credit and Refund Claims. Fuel credit and refund claims are to be made on a distributor’s original or amended fuel tax report unless otherwise authorized by statute or this chapter. All claims need to establish both of the following:(7-1-25)

a.The basis for the credit or refund claim, and(3-31-22)

b.The amount of the credit or refund.(3-31-22)

02.Line Flush Allowance. Undyed, tax-paid diesel is contaminated with red dye when a distributor delivers dyed diesel then flushes the line with undyed diesel. The contaminated undyed diesel will be put into the delivery truck’s dyed diesel fuel tank and sold as untaxed, dyed diesel. The distributor can claim a refund based on the actual gallons used to flush the line or standard allowance. A distributor will claim a fuel tax refund using the applicable forms.(7-1-25)

IDAPA 35.01.05.142 (Reserved)

IDAPA 35.01.05.150 Fuel Sale Documentation Required

Section 63-2429, Idaho Code Retail Sales Invoices for Delivered, Bulk Plant, and Station Sales. Any distributor who sells motor fuels and other petroleum products in Idaho will issue an original invoice to the purchaser; except when sales are accounted for monthly. The invoices may be issued to the purchaser at the time of billing. All sales invoices (including a credit card receipt used as a sales invoice) for motor fuels and other petroleum products sold at retail stations, bulk plants, or delivered to the customer’s location will contain the following:(7-1-25)

a.A preprinted identification number, except when invoices are automatically assigned a unique identification number by a computer or similar machine when issued;(3-31-22)

b.Name and address of the distributor;(3-31-22)

c.Name of the purchaser;(3-31-22)

d.Date of sale or delivery;(3-31-22)

e.Type of fuel;(3-31-22)

f.Gallons invoiced - reported as found in Section 137 of these rules;(7-1-25)

g.Price per gallon and total amount charged. When taxable motor fuels products are sold, at least one (1) of the following is used to establish the Idaho fuels tax and transfer fee was charged:(7-1-25)

i.The amount of Idaho fuels tax;(7-1-25)

ii.The rate of Idaho fuels tax; and(7-1-25)

iii.The amount of Idaho transfer fee; or(7-1-25)

iv.A statement that the Idaho fuels tax and transfer fee are included in the price.(7-1-25)

h.Delivered sales invoices will contain the purchaser’s address along with the origin and destination of the motor fuels and other petroleum products.(7-1-25)

i.The sales invoice will contain double-faced carbons on the original of the first copy, unless invoices are automatically prepared by a computer or similar machine when issued.(3-31-22)

02.Correcting Sales Invoice Errors. An incorrect invoice should be canceled by a credit invoice and cross-referenced to all copies of the invoice covering the transaction being corrected. If a second sales invoice is issued, it will show the date and serial number of the original invoice and that the second invoice is in replacement or correction.(7-1-25)

03.Disallowing Tax-Paid Credit. Not including all the above documentation will result in an invalid sales invoice for a tax-paid fuel claim by the distributor’s customer.(3-31-22)

04.Documentation Necessary for Dyed Diesel Fuel. The state of Idaho follows the Internal Revenue Service standards regarding sales of dyed diesel fuel. The Internal Revenue Code calls for a notice stating “Dyed Diesel Fuel, Nontaxable Use Only, Penalty for Taxable Use” to be:(7-1-25)

a.Provided by the terminal operator to any person who receives dyed diesel fuel at a terminal rack of that operator; and(3-31-22)

b.Provided by any seller of dyed diesel fuel to the buyer if the fuel is located outside the bulk transfer/ terminal system and is not sold from a posted retail pump; and(3-31-22)

c.Posted by a seller on any retail pump where the dyed diesel fuel is sold for use by the buyer.

d.The documentation notice found in this rule is necessary on shipping papers, bills of lading, and sales invoices accompanying the sale or removal of the fuel. Any person who does not provide or post the necessary notice is presumed to know that the fuel is used for a taxable purpose and is subject to penalties imposed by the Internal Revenue Service.(7-1-25)

IDAPA 35.01.05.151 (Reserved)

IDAPA 35.01.05.170 Information on Dyed & Undyed Diesel Fuel

Sections 63-2423, 63-2425, Idaho Code Undyed Diesel Fuel Used for Heating Purposes. The consumer will apply directly to the Tax Commission for a refund of the special fuels tax included in the purchase price of undyed diesel used for heating a dwelling or building. The distributor may assist the consumer claiming a refund of the special fuels tax by: (7-1-25)

a.Properly documenting information on the sales invoice; and(3-31-22)

b.Providing the customer with the appropriate forms.(7-1-25)

02.Red-Dyed Diesel. It is illegal to use red-dyed diesel in the main supply tank of a licensed, or required to be licensed, motor vehicle in Idaho unless the type of user is listed below. Penalties for illegal use of reddyed diesel in a motor vehicle are found in Section 63-2460, Idaho Code. The Internal Revenue Code allows the use of red-dyed diesel by:(7-1-25)

a.State and local governments (political subdivisions of the state) for their exclusive use;(7-1-25)

b.The engine of a train;(7-1-25)

c.A school bus, owned or leased and operated by a political subdivision of the state of Idaho, while the bus is engaged in the transportation of students and school employees;(7-1-25)

d.A vehicle (such as a ground servicing vehicle for aircraft) owned by an aircraft museum; (7-1-25)

e.A highway vehicle that is not registered (and is not required to be registered) for highway use under the laws of any state or foreign country and is used in the operator’s trade or business or for the production of income;

f.A highway vehicle owned by the United States that is not used on a highway;(7-1-25)

g.A nonprofit educational organization as defined in Internal Revenue Code Section 4221 (d)(5) for their exclusive use.(7-1-25)

IDAPA 35.01.05.171 Motor Fuels Exemption from Sales Tax

Sections 63-2431, 63-3622C, Idaho Code An y sale of motor fuels that is subject to motor fuels tax is exempt from Idaho sales tax under Title 63, Chapter 36, Idaho Code. If such purchases are later included in credits or refunds for motor fuels tax paid and not subject to taxes imposed by Title 63, Chapter 24, Idaho Code, and no other exemption applies, sales and use tax is applicable. Sales of dyed fuel are subject to Idaho sales tax unless exempted under the Idaho Sales Tax Act and Rules. Sales of dyed fuel are exempt from Idaho sales tax only if the seller has taken from the purchaser a sales tax exemption certificate in the manner outlined in IDAPA 35.01.02, “Idaho Sales and Use Tax Administrative Rules.” However, if the dyed fuel product delivered into a bulk storage tank is used exclusively for home heating purposes, a sales tax exemption certificate is not necessary.(7-1-25)

IDAPA 35.01.05.172 (Reserved)

IDAPA 35.01.05.185 Consent to the Jurisdiction of Idaho Courts

Section 63-2427A, Idaho Code Authorized Signature on Application. All Idaho fuel distributor license applications have to be signed by an individual with the authority to give consent to the jurisdiction of Idaho courts on behalf of the

02.Authority to Waive Sovereign Immunity. If the applicant is a state, local or tribal governmental entity, the application has to be accompanied by a separate authorization by the governing authority of the entity waiving sovereign immunity that the entity may otherwise assert against any action to enforce Idaho motor fuels tax laws in Idaho state court and setting forth the authority of the individual who signs the application to bind the

03.Irrevocable Submission and Waiver of Sovereign Immunity. The application constitutes an irrevocable submission to the jurisdiction of Idaho state courts, and the waiver of any sovereign immunity that may otherwise be asserted, as to all disputes related to the enforcement of Title 63, Chapter 24, Idaho Code.(7-1-25)

IDAPA 35.01.05.186 (Reserved)

IDAPA 35.01.05.230 Motor Fuels Subject to Use Tax -- Records

Section 63-2421, Idaho Code

01.Lack of Records to Compute Fuel Consumption Rate. When a motor fuels consumer does not keep sufficiently detailed records to determine motor fuels consumed by its motor vehicles, the consumption rates found in Subsection 290.05 of these rules are presumed to be correct.(3-31-22)

02.Fuel Records. If the motor fuels consumer does not keep sufficiently detailed records to determine taxable gallons, all tax-exempt motor fuels purchased is subject to the fuels tax unless the number of gallons placed into the supply tank of the licensed or required to be licensed motor vehicle can be determined.(3-31-22)

IDAPA 35.01.05.231 (Reserved)

IDAPA 35.01.05.250 Refund Claims -- Reporting

A Valid Refund Claim. Before the Tax Commission can credit or refund motor fuels taxes, the taxpayer making the claim must establish both of the following:(7-1-25)

a.The basis for the credit or refund claim, and(3-31-22)

b.The amount of the credit or refund.(3-31-22)

02.Only Final Consumer May Claim Refunds. Refunds of motor fuels taxes may be claimed on Tax Commission prescribed forms by the person who purchased and used the motor fuels upon which the tax has been paid. In the case of all partnerships and any corporations filing income tax returns, the partnership or corporation has to be the claimant for refunds of motor fuels taxes they paid. The refund may not be applied to the individual returns filed by partners or shareholders.(7-1-25)

03.Refund Applied to Taxes Due. Any refund due to a consumer is applied first to any liability due under any law administered by the Tax Commission, including any liability under IFTA, which is due and unpaid at the time the claim is filed. In addition, no refund will be paid if the claimant has not filed any tax return required to be filed with the Tax Commission. Any balance of the refund exceeding taxes due will be paid as a refund to the entity filing the return.(3-31-22)

IDAPA 35.01.05.251 (Reserved)

IDAPA 35.01.05.270 Refund Claims – General and Bulk Documentation

Sections 63-2410, 63-2421, 63-2423, Idaho Code Refunds to Consumers. Fuels tax refunds claims will be on Tax Commission prescribed forms.

02.Records Retention. All claimants will keep records for the greater of either:(7-1-25)

a.Three (3) years from the due date, including extensions, of the income tax return;(3-31-22)

b.The time during which the taxpayer’s income tax return is subject to adjustment by either the Tax Commission or voluntary action by the taxpayer if the refund claim is filed with the taxpayer’s Idaho income tax return; or(7-1-25)

c.Four (4) years, if an IFTA licensee.(3-31-22)

03.Mandatory Records – General. A claimant will maintain fuel purchase records and records showing fuel was placed into the supply tank of vehicles or equipment for use in a nontaxable manner. Fuel purchase records have to contain the information stipulated by Section 150 of these rules. Fuel purchase records need to be reissued if altered or corrected.(7-1-25)

04.Mandatory Records – Retail Fuel Purchases. When claiming a refund of tax for fuel purchased from a retail outlet, a receipt is mandatory. The vehicle, piece of equipment, or commercial motorboat using the fuel has to be recorded on the receipt. For fuel placed into containers, identify the vehicle, piece of equipment, or commercial motorboat the fuel was used in on the receipt.(7-1-25)

05.Mandatory Records – Bulk Fuel Purchases. When claiming a fuel tax refund on fuel delivered in bulk, the claimant will maintain the following documentation:(7-1-25)

a.Seller Invoices.(3-31-22)

b.Withdrawal Logs.(3-31-22)

i.It is mandatory that withdrawal logs identify the date, the vehicle or piece of equipment, and the amount of fuel withdrawn.(7-1-25)

ii.Withdrawal logs aren’t necessary when separate, identified, and dedicated bulk storage tanks are used for taxable and nontaxable uses at the same location. The seller has to mark the invoices at the time of delivery and identify the storage tanks to which the fuel was delivered.(7-1-25)

c.Bulk fuel inventory reconciliations include beginning inventory, purchases, withdrawals, calculated ending inventory, and actual ending inventory determined by a physical reading.(7-1-25)

06.Alternate Method for Bulk Tanks – Authorized Percentage. If the claimant is using Idaho taxpaid fuel from a single bulk tank in both a taxable and nontaxable manner, the claimant may submit a request to use an authorized percentage on a Tax Commission prescribed form. A claimant needs approval from the Tax Commission before using an authorized percentage. Itemization of all taxable and nontaxable uses by vehicle and piece of equipment based on previous experience or anticipated use will be included on the request form. Requests will be denied if the claimant:(7-1-25)

a.Fails to fully complete the authorized percentage request form;(7-1-25)

b.Fails to provide equipment lists supported equipment purchase records, sales or rent receipts, and depreciation schedules;(7-1-25)

c.Fails to keep and provide records to support an authorized percentage upon request of the Tax Commission;(7-1-25)

d.Is an IFTA licensee; or(7-1-25)

e.Is an owner of multiple bulk storage tanks containing tax-paid and tax-exempt fuels of the same type at the same location.(7-1-25)

07.Untaxed Motor Fuel Audits. All fuel tax refund claims are subject to audit by the Tax Commission and no part of these rules may be construed to imply that an audit cannot be performed.(7-1-25)

08.Tribal-Owned Retail Outlet. Motor fuels purchased from a tribal-owned retail outlet do not include the Idaho motor fuels tax and do not qualify as an Idaho tax-paid purchase, unless otherwise provided in an agreement between the state and appropriate tribe under the authority of Sections 63-2444 or 67-4002.(7-1-25)

IDAPA 35.01.05.271 (Reserved)

IDAPA 35.01.05.290 Refund Claims – Nontaxable Miles

01.Refunds to Consumers – Nontaxable Miles. Refund claims will be made on Tax Commission prescribed forms. The records retention and fuel record mandates in Subsections 270.02 through 270.05 of these rules also apply to this section.(7-1-25)

02.Nontaxable Miles Defined. Nontaxable miles are miles driven on roads:(3-31-22)

a.Not open to the public;(7-1-25)

b.Not maintained by a governmental entity;(7-1-25)

c.Located on private property maintained by the property owner;(7-1-25)

d.Under construction and not open to the public; or(3-31-22)

e.Constructed and maintained by the United States Forest Service, the United States Bureau of Land Management, the Idaho Department of Lands, or forest protective associations with which the state of Idaho has contracted or become a member pursuant to Title 38, Chapter 1, Idaho Code. Miles traveled on these roads are nontaxable when the contractor or subcontractor is mandated to pay the cost of maintaining these roads by contract or permit.(7-1-25)

03.Mandatory Records – Mileage Records. Mileage records are needed to claim a refund of tax when using special fuels on nontaxable roads. It is mandatory for claimants operating under the authority of IFTA or IRP to follow the recordkeeping mandates of IFTA and IRP in addition to those of this section. Idaho Full Fee registrants will also comply with Section 422 of these rules.(7-1-25)

04.Records – Actual Nontaxable Miles. Unless otherwise allowed by these rules, use of odometer, hubometer, or GPS readings for each trip is mandatory to document actual nontaxable miles.(7-1-25)

05.Alternate Methods. A claimant, who is not an IFTA licensee or IRP registrant, may use an alternate method to determine nontaxable miles or use a presumed miles per gallon (MPG) to determine fuel use.

a.Estimating Nontaxable Miles. Nontaxable miles may be estimated by using maps, contracts, or a Tax Commission approved trip analysis. The claimant is obligated to provide the documents supporting the estimate upon request by the Tax Commission. Maps other than the Official Idaho Highway map miles are estimates. (7-1-25)

b.Estimating Nontaxable Gallons. Nontaxable gallons may be estimated using presumed MPG. Upon request, the claimant is obligated to provide the tax-paid fuel purchase records supporting the total gallons claimed.

i.Presumed MPG by Weight. The following are presumed MPG by gross vehicle weight (GVW) or registered GVW:

ii.Presumed MPG by Operation. The following are presumed MPG for vehicles over 40,000 GVW or registered GVW used in certain industries:

Over 40,000 GVW4.0 MPG Over 26,000 GVW to 40,000 GVW5.5 MPG Over 12,000 GVW to 26,000 GVW7.0 MPG 12,000 GVW or less10.0 MPG Logging4.3 MPG Agricultural4.5 MPG

IDAPA 35.01.05.291 (Reserved)

IDAPA 35.01.05.292 Refund Claims – Power Take-Off (pto) and Auxiliary Engines

01.Refund to Consumers — PTO and Auxiliary Engines. PTO refunds are only allowed for special fuels. Auxiliary engine refunds are allowed for gasoline or special fuels. Refund claims will be made on Tax Commission prescribed forms. The records retention and fuel record mandates in Subsections 270.02 through 270.05 of these rules also apply to this section.(7-1-25)

02.PTO and Auxiliary Engines Defined. A PTO uses fuel from the main supply tank to operate the main engine for a purpose other than operating or propelling the vehicle on the road. An auxiliary engine uses fuel from the vehicle’s main supply tank to operate an engine other than the vehicle’s main engine.(3-31-22)

03.Mandated Records – Actual Consumption Refunds. Actual fuel consumption for PTO and auxiliary engines may be claimed when the PTO or auxiliary engines are equipped with an electronic monitoring device. It is mandatory for the monitoring device to identify the date, time of use, and gallons metered. The Tax Commission may request verification that the electronic monitoring device is reporting consumption correctly.

04.Alternate Methods – Standard Allowances. An IFTA licensee is not allowed to use alternate methods to determine nontaxable fuel use. The Tax Commission has adopted the following standard allowances.

a.Allowances based on unit quantities:

b.Allowances based on percentages:

Sand, gravel and rock hauling 4.0 MPG Construction4.4 MPG Allowance TypeAllowance RatesxUnit Quantities Gasoline/fuel oil0.00015 gallonsxGallons pumped Bulk cement0.1858 gallonsxTons pumped Refrigeration unit/reefer0.75 gallonsxHours unit operated Tree length timber/logs0.0503 gallonsxTons Hauled Tree length timber/logs3.46 gallonsxHours unit operated Carpet cleaning0.75 gallonsxHours unit operated Concrete Pumping0.142857 gallonsxYards pumped Allowance Type Percentage Per Gallon xGallons Consumed Concrete mixing30%xGallons consumed Garbage trucks25%xGallons consumed

05.Nonstandard Allowances. A claimant will submit a written request to the Tax Commission for authorization to use an allowance different from those listed in this section. The Tax Commission may request additional information or documentation to make a determination on the request.(7-1-25)

IDAPA 35.01.05.293 (Reserved)

IDAPA 35.01.05.300 Administration, Rules and Delegation of Authority

Sections 63-2434, 63-2442, Idaho Code Personn el of the Idaho Transportation Department employed in the operation of stationary or mobile Ports of Entry are designated as deputies of the Tax Commission for exercising the powers necessary to enforce the provisions of the special fuels tax laws. Such authority includes exercise of the powers described in Section 400 of these rules.

IDAPA 35.01.05.301 (Reserved)

IDAPA 35.01.05.310 Exemption from Tax Bond

Section 63-2428, Idaho Code Bond Exemption for Licensed Distributors. Bonds are mandatory for all licensed distributors unless the distributor is found to be financially responsible. A licensed distributor seeking exemption from bonding may apply for the exemption by filing a written petition with the Tax Commission. The petition will contain information defined in Section 63-2428, Idaho Code, for establishing financial solvency and responsibility. Together with the petition, the distributor will submit information detailed as follows:(7-1-25)

a.If all or any part of the unencumbered property offered to show financial solvency is real property, the petition will include both:(7-1-25)

i.A title report from an independent title company reporting on the state of the title of the real property as of a time not more than fifteen (15) days before the filing of the petition, and(7-1-25)

ii.A copy of the most recent valuation notice issued by the county assessor for ad valorem property tax purposes.(7-1-25)

b.If all or any part of the unencumbered property is licensed motor vehicles, the petition will include copies of the titles of the vehicles and evidence of the value of the vehicles from a source independent from the distributor.(7-1-25)

c.If all or any part of the unencumbered property is personal property other than motor vehicles, the petition will include a description of the property, evidence of ownership of the property, an independent appraisal of the property, and evidence that the property is unencumbered. Copies of all documents relating to all the distributor’s current and long-term liabilities, including contingent liabilities, lawsuits or potential lawsuits to which the distributor is or may become a party, are needed to establish that no security interests or other encumbrances exist.(7-1-25)

d.The petitioner will arrange, at the petitioner’s expense, for an established, independent commercial credit rating company to submit directly to the Tax Commission a current and complete credit report about the licensed distributor; or the distributor will include with the petition its most recent financial statements, including a current income statement, balance sheet, and statement of cash flows. If the petitioner is a publicly held company, the financial statements are to be accompanied by an opinion issued by an independent certified public accountant. A responsible company officer will also certify that the financial statements provided present fairly the financial position of the company. If the petitioner is a privately held company, the financial statements will be reviewed by a certified public accountant, and a responsible company officer will certify that the financial statements provided present fairly the financial position of the company.(7-1-25)

e.The Tax Commission may request the distributor supplement its petition with further information to determine financial responsibility. If the Tax Commission receives incomplete or substitute information, the submissions are reviewed on a case-by-case basis to determine whether a bond exemption is granted.(7-1-25)

02.Conditions for Termination of Exemption. If granted, the exemption from bonding will terminate:(7-1-25)

a.One (1) year after the date on which it was granted.(3-31-22)

b.Ninety (90) days after the occurrence of any delinquency in motor fuels tax unless the delinquency has been paid within that time period.(3-31-22)

c.Upon the occurrence of any encumbrance to the property upon which the finding of financial responsibility was based.(7-1-25)

d.Upon the occurrence of any change in the business activity of the distributor that would cause the amount of bond to be increased to an amount greater than the value of the distributor’s unencumbered assets.

e.Upon the occurrence of any event prejudicing the distributor’s solvency or financial responsibility.

03.Upon Termination of a Bond Exemption. Immediately upon any termination of the exemption from the requirement for a bond the distributor must supply the required bond according to Section 63-2428, Idaho Code.(7-1-25)

04.Pending Bond Exemption Application. Having an application pending for a bond exemption does not excuse the bond. If a bond exemption is due to expire, the distributor is obligated to submit a new petition applying for a continuation of the exemption no later than ninety (90) days before the day the exemption is due to expire to prevent a lapse in the exemption. The petition has to meet all the conditions of this rule.(7-1-25)

05.Conditions for Renewal of Bond Exemption. The following is necessary to renew a bond exemption:(7-1-25)

a.A written request for renewal of waiver; and(7-1-25)

b.The information required in Subsections 310.01.a. through 310.01.e. of this rule.(3-31-22)

IDAPA 35.01.05.311 Ifta License Bond

Sections 63-2442A, 63-2470, Idaho Code General. The Tax Commission may compel an IFTA licensee to post a bond following the IFTA provisions to maintain their license. A bond may be necessary when returns are filed or tax payments are remitted after the due date at least three times within a three-year period. When a bond is obligated, the licensee will post the bond within thirty (30) days from the date of the request. If no bond is posted within thirty (30) days, the license is automatically revoked. Tax may be assessed for any unreported liability.(7-1-25)

02.Reinstating Revoked Licenses. An applicant may be obligated to post a bond if they have previously had their IFTA license revoked or is related to a person who has previously had their IFTA license revoked. An applicant is related to a person who has previously had their IFTA license revoked when:(7-1-25)

a.The person or persons owns at least twenty-five percent (25%) interest in the applicant, or (7-1-25)

b.The person or persons operates or controls the applicant. Operation and control include, but are not limited to, an officer or director or other person authorized to engage in the business or commercial activity of the

03.Type of Bond. Any type of bond allowed by IFTA or these rules may be secured. The bond amount is reviewed annually but may be reviewed at any time thereafter. The licensee's returns and records may be reviewed to determine if the bond amount is raised, lowered, or remains unchanged.(7-1-25)

04.Bond Waiver Request. The licensee may request a waiver of bond requirement within thirty (30) days from the approval of the license renewal request. The licensee has to be a quarterly filer. The licensee needs to have submitted the quarterly returns and paid the tax due by the due date for one calendar year.(7-1-25)

05.Denial of Bond Waiver Request and Appeal of Denial. The Tax Commission may deny a bond waiver request when it determines that waiving the bond puts the financial interests of IFTA jurisdictions in jeopardy.

The licensee needs to follow the appeal procedure in Section 63-2470, Idaho Code, to appeal the denial of a bond waiver request.(7-1-25)

IDAPA 35.01.05.312 (Reserved)

IDAPA 35.01.05.320 Records Retention

Section 63-2429, Idaho Code

01.Mandatory Records. Any person importing, manufacturing, refining, dealing in, transporting, storing or selling any motor fuels in Idaho will keep such records, receipts, and invoices showing all purchases, sales, receipts, or deliveries of motor fuels. Such records are maintained for at least three (3) years.(7-1-25)

02.Motor Fuels Subject to Use Tax. Any person who has purchased tax-exempt motor fuel and subsequently uses the fuel in a taxable manner, will maintain records to establish the tax due.(7-1-25)

03.Original Invoice Retention. The original invoices, mandated by Section 270 of these rules, relating to refunds of motor fuels tax paid on certain fuel used off-road, will be retained for the greater of either three (3) years or the time during which the taxpayer’s Idaho income tax return is subject to adjustment by either the Tax Commission or by voluntary action of the taxpayer.(7-1-25)

IDAPA 35.01.05.321 (Reserved)

IDAPA 35.01.05.400 Ifta Licensing and Special Fuels Permitting

Sections 49-432, 49-434, 63-2401, 63-2434, 63-2438 through 63-2440, 63-2442A, 63-2455, Idaho Code

01.Federal or In-State Governmental Vehicles. Motor vehicles owned or leased and operated by the federal government or the state of Idaho, their instrumentalities, or political subdivisions are exempt from licensing requisites.(7-1-25)

02.Temporary Fuel Tax Permits. Any person without an IFTA license will secure a temporary fuel tax permit from the Idaho Transportation Department in the manner prescribed by that department, if operating a motor vehicle:(7-1-25)

a.Over twenty-six thousand (26,000) pounds maximum registered gross weight or(7-1-25)

b.With three (3) or more axles regardless of weight, and(7-1-25)

c.Using special fuels on the highways of this state, and(7-1-25)

d.Not registered to operate the motor vehicle solely within Idaho under Section 49-434, Idaho Code.

03.Penalty for Not Obtaining an IFTA License or Temporary Fuel Tax Permit. Operation of a motor vehicle, as described in Subsection 400.02. of these rules, without an IFTA license, or an Idaho temporary fuel tax permit is hereby deemed to be an act tending to prejudice the collection of the special fuels tax and an act that renders wholly or partially ineffective the procedures for collection of that tax. Accordingly, any deputy of the Tax Commission, including those designated as deputies in Section 300 of these rules, may issue a jeopardy assessment under the authority of Section 63-2434, Idaho Code. Such deputy is authorized to institute immediate collection procedures, including issuance of a tax warrant and distraint of the motor vehicle without either an IFTA license or a temporary fuel tax permit.(7-1-25)

IDAPA 35.01.05.401 (Reserved)

IDAPA 35.01.05.420 Documentation for Ifta Licensee Reporting

Section 63-2439, Idaho Code

01.Records for IFTA Licensees. The licensee displaying, or obligated to display, an IFTA decal will retain all records relating to the accrued distance of the motor vehicles and all invoices or other documents relating to purchases of special fuels. The licensee will provide these records upon request by the Tax Commission.(7-1-25)

02.Distance Records. It is mandatory for all IFTA licensees to maintain detailed distance records, on an individual-vehicle basis, according to IFTA Procedures Manual Section P540.(7-1-25)

03.Fuel Records. It is mandatory for all IFTA licensees to maintain detailed fuel records, on an individual-vehicle basis, according to IFTA Procedures Manual Section P550.(7-1-25)

04.Additional Records. Other records may be requested, such as:(7-1-25)

a.Bills of lading or manifest documents;(3-31-22)

b.Vehicle dispatch ledgers;(3-31-22)

c.Accounts payable and receivable;(3-31-22)

d.Lease agreements;(3-31-22)

e.Driver pay records;(3-31-22)

f.Driver logs;(3-31-22)

g.Fuel use trip permits;(7-1-25)

h.Registration trip permits;(7-1-25)

i.Other commercial vehicle permits; and(7-1-25)

j.Other documents used in preparing fuel tax reports.(3-31-22)

05.Summaries. In addition to the information outlined in the IFTA Procedures Manual Section P560, individual trips for each vehicle have to be accumulated into monthly summaries in total and by jurisdiction. These summaries have to be used as the basis for the miles submitted on the IFTA quarterly or annual reports.(7-1-25)

06.Distance Information. Information recorded on trip sheets is to be legible and reflect actual distance traveled. Distance records will include all movement of the vehicle including loaded, empty, and tractor-only (bobtail) distance traveled.(7-1-25)

07.Retention and Availability of Records. IFTA licensees need to retain and make available records according to IFTA Procedures Manual Section P510.(7-1-25)

08.Distance Disputes. Whenever a distance dispute arises between the taxpayer and the Tax Commission, the official distance map distributed by the appropriate authority in each jurisdiction is used to resolve the point-to-point distance differences.(7-1-25)

IDAPA 35.01.05.421 Documentation for Idaho Irp Registrants

Section 49-439, Idaho Code Registrants are obligated to keep records, by individual vehicle per registered fleet, verifying the accuracy of any IRP application submitted to the Idaho Transportation Department for each application reporting period of July 1st through June 30th. Registrants are held to the standards established by Section 420 of these rules for all IRP registered vehicles.(7-1-25)

IDAPA 35.01.05.422 Documentation for Idaho Full Fee Registrants

Section 49-439, Idaho Code

01.Records For Idaho Full Fee Registrations. Registrants are obligated to keep records, by individual vehicle, verifying the accuracy of any Idaho Full Fee registration application submitted to the Idaho Transportation Department for each reporting period of July 1st through June 30th, unless exempted pursuant to Section 49-439, Idaho Code. Mandatory records include, but are not limited to:(7-1-25)

a.Distance Measuring Devices. Distance is measured using an odometer, hubometer, GPS or perpetual life-to-date readings. Records identify the date the reading was recorded and the reading. When changing devices, the change needs to be properly documented.(7-1-25)

b.Daily Trip Logs. Logs include the date of travel, origin and destination of the trip, and number of miles traveled. Logs may be supported by load tickets, billing invoices, or other original source documents that can verify miles traveled.(3-31-22)

c.Number of Trip/Round Trip Miles. When making numerous short trips from the same origin to the same destination, records include the origin, destination, and round-trip miles. Computations need to be supported by scale tickets, load tickets, a route map, or a Tax Commission approved trip analysis.(7-1-25)

d.Fuel Purchases. Valid retail fuel purchase records are fuel invoices with the date, location, quantity, and type of fuel purchased. Bulk fuel records need to be sufficient to prove the accuracy of the fuel use. Fuel purchase records need to show the usage per unit. The records need to document how the average MPG was calculated.

02.Credit for Off-Road Miles and Documentation. Credit for off-road miles may be given for roads not maintained by a government entity or roads built or maintained by the registrant pursuant to a contract, according to Section 290 of these rules. These include roads on private property, roads under construction but not open to the public, and may include designated Forest Service roads. Off-road miles need to be documented by using odometer readings, maps, contracts, GPS readings, or a Tax Commission approved trip analysis.(7-1-25)

03.IFTA Licensees with Full Fee Registration. An IFTA licensee with full fee registration will maintain records mandated by IFTA.(7-1-25)

IDAPA 35.01.05.423 (Reserved)

IDAPA 35.01.05.510 Application and Reporting of the Transfer Fee

Sections 41-4902, 41-4903, 41-4909, 63-2401 , 63-2403, 63-2406, Idaho Code

01.Application. The legal incidence of the fee is on the first distributor which receives any petroleum or petroleum product. This distributor is mandated to report and pay the transfer fee to the Tax Commission. Only licensed Idaho fuel distributors may receive refunds or credits of the transfer fee. The refunds or credits have to be claimed in the distributor report.(7-1-25)

02.Receipt of Petroleum Products. Receipt of petroleum or petroleum products is determined by the movement from a permanent storage facility (terminal) or crossing the Idaho border. Storage of petroleum or petroleum products is incidental to its movement.(7-1-25)

03.Exemption to Application of the Transfer Fee. Exemptions are according to Sections 41-4909 and 41-4943, Idaho Code.(7-1-25)

04.Casualty Loss and Two Percent (2%) Allowance Not Deductible. All petroleum and petroleum products received in this state that are not within an exemption or exclusion provided by law are subject to the fee, without further deductions or discounts despite the product’s use. Deductions allowed to motor fuel distributors in Section 63-2407, Idaho Code, for casualty loss and the two percent (2%) allowance are not deductions applicable to the transfer fee.(7-1-25)

05.Petroleum and Petroleum Products. Products refined from crude oil include, but are not limited to:(7-1-25)

a.Motor gasoline;(7-1-25)

b.Alcohol blended fuels, such as E-10 and E-85, including the alcohol content of blended fuel;

c.Diesel fuel (#1 - #6);(7-1-25)

d.Biodiesel blended fuels, such as B-20, including the biodiesel content of the blended fuel; (7-1-25)

e.Heating oil;(7-1-25)

f.Aviation fuel;(7-1-25)

g.Naphtha;(7-1-25)

h.Naphtha-type jet fuel;(7-1-25)

i.Kerosene-type jet fuel (JP#1 - #8);(7-1-25)

j.Motor oil;(7-1-25)

k.Brake fluid;(7-1-25)

l.Tractor fuel;(7-1-25)

m.Distillate fuel oil;(7-1-25)

n.Stove fuel;(7-1-25)

o.Unfinished oils;(7-1-25)

p.Turpentine substitutes:(7-1-25)

q.Lamp fuel;(7-1-25)

r.Diesel oils (#1 - #6);(7-1-25)

s.Engine oils;(7-1-25)

t.Railroad oils;(7-1-25)

u.Kerosene;(7-1-25)

v.Commercial solvents;(7-1-25)

w.Lubricating oils;(7-1-25)

x.Fuel oil;(7-1-25)

y.Boiler fuel;(7-1-25)

z.Refinery fuel;(7-1-25)

aa.Industrial fuel;(7-1-25)

bb.Bunker fuel;(7-1-25)

cc.Residual fuel oil;(7-1-25)

dd.Road oils; and(7-1-25)

ee.Transmission fluids.(7-1-25)

ff.The following are treated as petroleum or petroleum products that are subject to the transfer fee:

i.Ethanol (E00);(7-1-25)

ii.Natural gasoline; and (7-1-25)

iii.Biodiesel (B00).(7-1-25)

06.Exclusion of Petroleum and Petroleum Products on Which the Fee Has Previously Been Paid.

Used oil is presumed to be comprised of petroleum or petroleum products on which the transfer fee has previously been paid when generated in Idaho. The distributor will not report used oil generated in Idaho on the distributor report nor pay or receive a credit of the transfer fee on used oil generated in Idaho. When used oil is not generated in Idaho it is presumed to be subject to the transfer fee. The distributor has to report and pay the transfer fee unless an exemption or exclusion applies.(7-1-25)

07.Motor Fuel Distributor License and Limited Distributor License. Any person holding a motor fuel distributor license issued by the Tax Commission under Title 63, Chapter 24, Idaho Code, is also licensed for the transfer fee. No additional license is necessary. Any person who receives any petroleum or petroleum products in Idaho, and who is not a licensed distributor or obligated to obtain a motor fuel distributor license, needs to apply for a limited distributor license with the Tax Commission. The limited distributor license is only for reporting the transfer

fee.(7-1-25)

08.Mandatory Reporting.(7-1-25)

a.A motor fuel distributor will report and pay the transfer fee with the distributor report in accordance with Section 63-2406, Idaho Code. For fuel subject to the taxes imposed by Sections 63-2402 and 63-2408, Idaho Code, the transfer fee is included in the distributor report for the same fuel.(7-1-25)

b.Persons holding a limited distributor license will file a monthly report using Tax Commission prescribed forms on or before the last day of the month following the month to which the report relates.(7-1-25)

c.The transfer fee has to be reported according to Section130 of these rules.(7-1-25)

09.Payment.(3-31-22)

a.Payment of the fee is due on the due date of the report. For method of payment, including required use of electronic funds transfer, see Section 67-2026, Idaho Code.(7-1-25)

b.Any partial payment or collection of amounts shown due or obligated to be shown due on a distributor’s report, plus any additional amount of penalty or interest due, is allocated between the motor fuels tax and the transfer fee in the same proportion that the liability for the tax and the fee bear to the total liability.(7-1-25)

IDAPA 35.01.05.511 (Reserved)