63-3026B. AFFECTED BUSINESS ENTITIES — STATE AND LOCAL TAXATION TREATMENT. (1) As used in this section:
(a) "Affected business entity" means any partnership or S corporation that elects to be subject to tax pursuant to this section.
(b) "Direct member" means a member that holds an interest directly in an affected business entity.
(c) "Indirect member" means a member that itself holds an interest, through a direct or indirect member that is a partnership or S corporation, in an affected business entity.
(d) "Member" means:
(i) A shareholder of an S corporation;
(ii) A partner in a general partnership, a limited partnership, or a limited liability partnership; or
(iii) A member of a limited liability company that is treated as a partnership or an S corporation for federal income tax purposes.
(e) "Partnership" has the meaning provided in section 63-3006B, Idaho Code. "Partnership" includes a limited liability company that is treated as a partnership for federal income tax purposes as described in section 63-3006A, Idaho Code.
(f) "S corporation" means a corporation or limited liability company that is treated as an S corporation for federal income tax purposes.
(g) "Taxable year" means the taxable year of a partnership or an S corporation for federal income tax purposes.
(2) (a) A partnership or an S corporation may elect in the manner set forth in this section to become an affected business entity required to pay the tax under this section in any taxable year. A separate election must be made for each taxable year.
(b) An election under this section must be made on a form and in the manner as the state tax commission prescribes by rule or instruction.
(c) An election under this section may be made for any taxable year by filing the election with a timely filed original return for such taxable year.
(d) An election made under this section must be signed by:
(i) Each member of the electing entity who is a member at the time the election is filed; or
(ii) Any officer, manager, or member of the electing entity who is authorized under local law or by the entity’s organizational documents to make the election and who represents under penalty of perjury that he has such authorization.
(3) Each affected business entity that is a partnership or an S corporation transacting business in this state shall, on or before April 15 following the close of each taxable year, pay a tax in an amount determined as follows:
(a) Add the separately and nonseparately computed items as described in section 702(a) of the Internal Revenue Code for a partnership, or as described in section 1366 of the Internal Revenue Code for an S corporation, to the extent derived from or connected with sources within this state, as determined under the provisions of sections 63-3026 and 63-3026A, Idaho Code;
(b) Increase or decrease the sum from paragraph (a) of this subsection according to the modifications permitted under this chapter that relate to an item of the affected business entity’s income, gain, loss, or deduction, to the extent derived from or connected with sources within this state, as determined under the provisions of sections 63-3026 and 63-3026A, Idaho Code; and
(c) Multiply the result from paragraph (b) of this subsection by the tax rate applicable to corporations provided in section 63-3025, Idaho Code.
(4) If the amount calculated under subsection (3)(b) of this section results in a net loss, such net loss may be carried forward to succeeding taxable years for which the affected business entity elects to be subject to tax pursuant to this section until fully used.
(5) If an affected business entity is a direct or indirect member of another affected business entity, the member affected business entity shall, when calculating its net income or loss pursuant to subsection (3)(b) of this section, subtract its distributive share of income or add its distributive share of loss from the affected business entity in which it is a direct or indirect member to the extent that the income or loss was derived from or connected with sources within this state.
(6) A nonresident individual who is a member is not required to file an income tax return under section 63-3030, Idaho Code, for any taxable year in which the only source of income derived from or connected with sources within the state for such member, or the member and the member’s spouse if a joint federal income tax return is or shall be filed, is from one (1) or more affected business entities and such affected business entity or entities file and pay the tax due under this section.
(7) Each partnership and S corporation shall report to each of its members, for each taxable year, such member’s direct pro rata share of the tax imposed under this section on such partnership or S corporation if it is an affected business entity and its indirect pro rata share of the tax imposed on any affected business entity in which such affected business entity is a direct or indirect member.
(8) (a) Each individual who is a member and is subject to tax under section 63-3024, Idaho Code, is entitled to a credit against such tax. The credit will be in an amount equal to the individual’s direct and indirect pro rata share of the tax paid under this section by any affected business entity of which the individual is a direct or indirect member. If the amount of the credit allowed pursuant to this paragraph exceeds the individual’s tax liability for the tax imposed under this chapter, the individual will be paid a refund equal to the balance of the unused credit.
(b) Each individual who is a member and is subject to the tax under section 63-3024, Idaho Code, as a resident or a part-year resident of this state is entitled to a credit against such tax for the individual’s direct and indirect pro rata share of taxes paid to another state of the United States or the District of Columbia, on income of any partnership or S corporation of which the individual is a member that is derived therefrom, provided the taxes paid to another state of the United States or the District of Columbia results from a tax that the state tax commission determines is substantially similar to the tax imposed under this section. Any such credit will be calculated in the manner prescribed by the state tax commission and shall be consistent with the provisions of section 63-3029, Idaho Code.
(9) Each corporation that is a member and is subject to the tax imposed under section 63-3025 or 63-3025A, Idaho Code, is entitled to a credit against such tax. The credit will be in an amount equal to the corporation’s direct and indirect pro rata share of the tax paid under this section by any affected business entity of which the corporation is a member. Such credit will be applied after all other applicable credits have been applied. Any balance of the credit that is not used in the taxable year during which the corporation reports the net income from such affected business entities will be paid as a refund to the corporation.
(10) The penalty and interest provisions and the collection and enforcement procedures provided by sections 63-3038 through 63-3040, 63-3042 through 63-3065A, 63-3071, 63-3075, and 63-3078, Idaho Code, shall apply and be available to the state tax commission for enforcement of the provisions of this section and collection of any amounts due under this section. Said sections shall, for this purpose, be considered part of this section, and wherever liens or any other proceedings are defined as income tax liens or proceedings, they shall, when applied in enforcement or collection under this section, be described as affected business entity tax liens and proceedings.
History:
[63-3026B, added 2021, ch. 239, sec. 1, p. 730.]