- 1 -

IN THE SUPREME COURT OF THE STATE OF IDAHO

Docket No. 35848

DAVID and KATHY PARKER,

 Plaintiffs-Appellants,

v.

IDAHO STATE TAX COMMISSION,

 Defendant-Respondent. 

)

)

)

)

)

)

)

)

)

Boise, December 2009 Term

2010 Opinion No. 27

Filed: March 17, 2010

Stephen Kenyon, Clerk

Appeal from the District Court of the Fourth Judicial District of the State of 

Idaho, Ada County. Hon. Ronald J. Wilper, District Judge.

The decision of the district court is affirmed.

Lawrence G. Sirhall Jr., Boise, for appellant. 

Hon. Lawrence G. Wasden, Attorney General, Boise, for respondent. Lawrence 

Allen argued.

 _______________________________________________

HORTON, Justice

This appeal involves Idaho state income tax payments by David and Kathy Parker for 

income earned in 2003 and 2004. The Idaho State Tax Commission (the Commission) 

determined that the Parkers’ tax payments were deficient for those years. David and Kathy 

sought review by the district court. The district court granted summary judgment in favor of the 

Commission. We affirm. 

I. FACTUAL AND PROCEDURAL BACKGROUND

The Parkers were married at all times during 2003 and 2004 (“the relevant years”). 

Kathy was domiciled in Idaho and David was domiciled in Nevada throughout this time. The 

Parkers filed income tax returns with both the Internal Revenue Service and the Commission 

declaring their status as “married filing joint” for the relevant years. Nevada does not impose an 

individual income tax, so the Parkers did not file tax returns with that state. On their Idaho 

returns for the relevant years, the Parkers reported only the income earned by Kathy while she 

was domiciled in Idaho and did not report the income earned by David. 
- 2 -

The Commission conducted an audit of the Parkers’ returns for the relevant years and 

determined that one-half of the income earned by David was subject to Idaho income tax because 

Kathy was entitled to one-half of the Nevada income as community property. On April 2, 2007,

the Commission issued a notice of deficiency to the Parkers, and on May 3, the Parkers’ 

accountant filed a petition for redetermination and asked the Commission for a hearing. 

Following the hearing, the Commission issued a decision1upholding the determination that the 

Parkers owed income tax on one-half of the income earned by David while domiciled in Nevada

for the relevant years. 

The Parkers timely filed a petition for judicial review of the Commission’s amended 

decision on February 22, 2008 and made the security deposit required by I.C. § 63-3049. The 

Parkers alleged that the Commission’s determination was “capricious, without a basis in law or 

fact, arbitrary and otherwise erroneous.” The Commission responded on March 14, 2008,

pointing out that the action should proceed as a de novo proceeding pursuant to I.C. § 63-3049, 

rather than as a petition for review, and therefore filed an answer to what it termed the Parkers’ 

“complaint.” On June 24, 2008, the parties filed a statement of “Stipulated Facts” which 

specified, among other things, that the sole issue before the district court was whether the 

Commission erred when it determined that one-half of the income earned by David while he was 

domiciled in Nevada is subject to Idaho income tax. 

On July 1, 2008, the Parkers filed a motion for summary judgment requesting the court to 

require the Commission to recalculate the Parkers’ income tax without the inclusion of David’s 

income. The Parkers also filed an affidavit from David in which he stated that he did not receive 

any financial assistance from Kathy or have any Idaho-sourced income during the years in 

question. The Commission filed a responsive “Affidavit of Jim Gunter Regarding Summary 

Judgment” on July 18, 2008. Gunter is the tax specialist with the Commission who conducted 

the redetermination in the Parkers’ case. Although styled as an “affidavit,” this document is 

something between an affidavit and a legal brief in which Gunter expresses his opinions as to 

questions of tax and community property law. In the affidavit, Gunter asserted that David would 

have been required to file an Idaho income tax return even if he and Kathy had filed separate 

returns due to David’s share of the taxable income from certain Idaho real estate income pass-

 

1

 The decision was later amended to correct a clerical error.
- 3 -

through entities. The Parkers moved to strike this opinion on the basis that it was a legal 

conclusion that was for the court to make and as speculative and irrelevant. 

On October 23, 2008, the district court issued its combined “Order Denying [the 

Parkers’] Motion to Strike,” “Order Denying [the Commission’s] Motion to Strike,” “Order

Granting [the Commission’s] Motion for Summary Judgment,” and “Order Denying [the 

Parkers’] Motion for Summary Judgment.” The court found that the Parkers were not entitled to 

equitable relief under Idaho law. The court also rejected the Parker’s claim that the 

Commission’s determination violated the Due Process Clause and the Commerce Clause. The 

Parkers timely appealed from the district court’s final judgment in which the Commission was 

awarded $36,709. 

II. STANDARD OF REVIEW

A taxpayer may appeal a determination by the Commission by filing a complaint against 

the Commission in district court. I.C. § 63-3049. The case is to proceed as a de novo bench 

trial. I.C. § 63-3049; cf. I.C. § 63-3812(c).

2

 A deficiency determination issued by the 

Commission is presumed to be correct, and the burden is on the taxpayer to show that the 

Commission’s decision is erroneous. Albertson’s Inc. v. State Dep’t of Revenue, 106 Idaho 810, 

814, 683 P.2d 846, 850 (1984). 

When this Court reviews a district court’s decision on summary judgment, 

it employs the same standard as that properly employed by the trial court when 

originally ruling on the motion. Summary judgment is proper “if the pleadings, 

depositions, and admissions on file, together with the affidavits, if any, show that 

there is no genuine issue as to any material fact and that the moving party is 

entitled to judgment as a matter of law.” I.R.C.P. 56(c).

 

2

 Idaho Code § 63-3049 does not explicitly state that an application for review of a decision by the Commission, 

filed directly with the district court is to be heard de novo. Rather, I.C. § 63-3049(a) provides, in pertinent part, as 

follows:

 Redetermination by the state tax commission may be reviewed . . . by a complaint filed by the 

taxpayer against the state tax commission within ninety-one (91) days after the receipt of notice of 

the decision of the state tax commission denying, in whole or in part, any protest of the taxpayer 

or, within the same period, by filing an appeal with the board of tax appeals. Upon the serving of 

summons upon the state tax commission the case shall proceed as other civil cases but may be 

heard by the judge in chambers.

(emphasis added).

 In the event that the taxpayer appeals to the board of tax appeals, subsequent proceedings before the district court 

are governed by I.C. § 63-3812(c). That statute provides that appeals to the district court “shall be heard and 

determined by the court without a jury in a trial de novo on the issues in the same manner as though it were an 

original proceeding in that court.” 

 As these statutes are in pari materia, we conclude that the emphasized language of I.C. § 63-3049 directs that 

the district court proceedings are to be conducted de novo without the right to a jury trial. 
- 4 -

Kolln v. Saint Luke’s Reg’l Med. Ctr., 130 Idaho 323, 327, 940 P.2d 1142, 1146 (1997) (internal 

citations omitted). 

III. ANALYSIS

The district court upheld the Commission’s decision that one-half of David’s Nevada 

earnings were taxable because, by operation of Idaho community property law, those earnings 

are income attributable to Kathy. The Parkers urge on appeal that the district court erred in not 

applying Nevada community property law, in not concluding that taxing one-half of David’s 

earnings would violate due process, and in not striking the portions of Gunter’s affidavit that 

asserted that David received income generated in Idaho. The Parkers also allege that the district 

court erred in not holding that taxing one-half of David’s Nevada earnings would violate the 

Commerce Clause. Finally, the Parkers contend that the district court erred in not reading 

federal provisions for equitable relief into Idaho tax law. The Commission seeks attorney fees 

on appeal.

A. We decline to address whether the district court erred in applying Idaho rather than 

Nevada community property law.

The Parkers argue that the district court erred in applying Idaho rather than Nevada 

community property law and that under Nevada law, David’s earnings during the years in 

question might be considered separate property. Specifically, the Parkers allege that the district 

court erred in only discussing Idaho community property law when the Commission, in its 

amended decision, discussed both Idaho and Nevada community property law. The Parkers, 

however, stipulated before the district court that “[t]he Audit Division determined that one-half 

of the income earned by Mr. Parker while he was domiciled in Nevada was subject to Idaho 

income tax because under the community property laws of Idaho, Ms. Parker was entitled to onehalf of the Nevada income.” There is no indication in the record that the Parkers said anything 

more regarding the choice of law to the district court, and the district court did not address the 

issue or mention Nevada community property law in its decision. Accordingly, we decline to 

address the choice of law issue for the first time on appeal. Dunn v. Baugh, 95 Idaho 236, 238, 

506 P.2d 463, 465 (1973). 

B. We affirm the district court’s holding that the taxation of Kathy’s one-half interest in

David’s Nevada earnings does not violate due process.

The Parkers assert that the State of Idaho (the State), through the Commission, violates 

due process when it taxes income earned outside of its borders.
- 5 -

It is undisputed that during the relevant years, Kathy was an Idaho resident and that she 

and David were married. Idaho Code § 32-906 provides that property acquired after marriage is 

community property, subject to exceptions not present in this case. This includes a spouse’s 

earnings. Suter v. Suter, 97 Idaho 461, 466, 546 P.2d 1169, 1174 (1976). As David’s earnings 

during the relevant years were community property, Kathy’s one-half interest in those earnings 

were subject to federal taxation. Forbush v. Commissioner, T.C. Memo. 1979-214, 38 T.C.M. 

(CCH) 871, 1979 WL 3279 (U.S.Tax Ct.) (citing Hopkins v. Bacon, 282 U.S. 122 (1930); 

Goodell v. Koch, 282 U.S. 118 (1930); Poe v. Seaborn, 282 U.S. 101 (1930)). See also Babcock 

v. Commissioner, T.C. Memo. 1979-372, 39 T.C.M. 139 (CCH), 1979 WL 3424 (U.S.Tax Ct.).

Idaho’s taxation scheme mirrors that of federal law. “It is the intent of the [Idaho]

legislature . . . insofar as possible to make the provisions of the [Idaho Income Tax Act] identical 

to the provisions of the Federal Internal Revenue Code relating to the measurement of taxable 

income . . . .” I.C. § 63-2002. Therefore, for purposes of computing Idaho taxable income, just 

as in computing federal taxable income, one-half of David’s earnings are included in determining

Kathy’s gross income. The question is whether the fact that this income derived from Nevada

somehow precludes the State from taxing it. 

This Court answered the question whether the State may tax income earned outside of its 

borders in Herndon v. West, 87 Idaho 335, 393 P.2d 35 (1964). In that case, the taxpayer was a 

resident of Idaho and was also a general partner in an Oklahoma business from which she 

derived income. Herndon, 87 Idaho at 338, 939 P.2d at 36. The taxpayer argued that the State’s 

attempt to tax her Oklahoma income violated her rights under the Fourteenth Amendment to the 

United States Constitution. Id. at 340, 939 P.2d at 37. This Court stated that:

The Supreme Court of the United States has made it clear that a state has 

the power to tax in relation to a resident’s income derived from sources outside 

the State and that there is nothing in the Federal Constitution to prevent the 

exercise of such power. The rationale for allowing a state to compute a tax on 

income earned elsewhere is based on the premise that inhabitants are supplied 

many services by their state of residence and should contribute toward the support 

of the state, no matter where their income is earned.

Id. (citations omitted). 

During the relevant years, Kathy was a resident of Idaho and derived income from her 

one-half interest in David’s earnings in Nevada. Kathy was supplied many services by the State, 
- 6 -

and there is nothing in the Constitution to prevent the State from taxing her income in return—

regardless of the fact that the income was derived from a source outside of the State. 

The Parkers argue, however, that taxing one-half of David’s Nevada income violates 

David’s due process rights because the only contacts he has with Idaho are his marriage to 

Kathy. With respect to the earnings that the Commission seeks to tax, however, David’s contacts 

with the State are irrelevant.3 In taxing one-half of David’s Nevada earnings, the Commission is 

not seeking to impose a tax on David, but rather on Kathy. As stated, one-half of David’s 

earnings were income attributable to Kathy for purposes of taxation. Kathy was a resident of 

Idaho. There is nothing in the Commission’s act of taxing Kathy’s income, even though derived 

from David’s earnings in Nevada, that offends due process. 

C. We affirm the district court’s holding that taxing of one-half of David’s Nevada earnings 

does not violate the Commerce Clause.

 

The Parkers also argue that taxing one-half of David’s Nevada earnings violates the 

Commerce Clause. The Commission argues that because it is only seeking to tax Kathy’s 

income, albeit income derived from David’s Nevada earnings, the Commerce Clause is not 

implicated in this case.

“To show that the Commerce Clause is implicated by a tax statute, [a taxpayer] must 

demonstrate that the state’s taxation of [her] entire income has a substantial effect on an 

identifiable interstate economic activity or market.” 71 Am. Jur. 2d State and Local Taxation § 

391 (2009) (citing Stelzner v. Comm’r of Revenue, 621 N.W.2d 736, 740 (Minn. 2001)).

“The dormant Commerce Clause protects markets and participants in markets, not 

taxpayers as such.” Gen. Motors Corp. v. Tracy, 519 U.S. 278, 300 . . . (1997). 

Therefore, the dormant Commerce Clause will not apply unless there is actual or 

prospective competition between entities in an identifiable market and state action 

that either expressly discriminates against or places an undue burden on interstate 

 

3 The district court rejected the Parkers’ argument by pointing out that 

[t]here is evidence in the record sufficient to conclude that during the years at issue, Mr. Parker 

had an interest in income producing property located in Idaho. Further, half of the marital 

community was domiciled in Idaho. Mr. Parker has sufficient minimum contacts with the state of 

Idaho to subject him to income tax in the state.

Presumably, the evidence that the district court was referring to is the information in Gunter’s affidavit, contained in 

paragraph 24, which indicates that David had taxable income derived from Idaho sources during the years in 

question. Accordingly, even if the district court erred in refusing to strike paragraph 24 of Gunter’s affidavit as the 

Parkers now urge, such error would be harmless, and we therefore need not address the issue. I.R.C.P. 61 (“The 

court at every stage of the proceeding must disregard any error or defect in the proceeding which does not affect the 

substantial rights of the parties.”) 
- 7 -

commerce. Tracy, 519 U.S. at 300 . . . . Furthermore, this impact must be more 

than merely incidental. United States v. Lopez, 514 U.S. 549, 559 . . . (1995).

Stelzner, 621 N.W.2d at 740-41. 

In order to show that the Commerce Clause is implicated in this case, the Parkers would 

need to show that the State’s taxation of Kathy’s entire income has a substantial effect on an 

identifiable interstate economic activity or market. They have failed to identify any interstate 

economic activity or market that is burdened by the taxation of Kathy’s Nevada income. 

The Commerce Clause is not implicated in this case. Although the district court did not 

reach this same conclusion, it did ultimately hold that the Commerce Clause would not be 

violated by the Commission taxing Kathy’s Nevada income. Thus, we affirm the district court’s 

decision to grant summary judgment in favor of the Commission on this issue, albeit for a 

different reason. 

D. We affirm the district court’s decision not to read the federal provisions for equitable

relief urged by the Parkers into Idaho tax law.

The Parkers argue that the district court erred in not reading into Idaho law two federal 

provisions that they claim would offer them equitable relief from paying income tax on one-half

of David’s Nevada earnings. The Parkers first argue that Idaho law should include the 

equivalent of 26 U.S.C. § 66, entitled “Treatment of Community Income,” specifically section 

(c), which states:

(c) Spouse relieved of liability in certain other cases 

Under regulations prescribed by the Secretary, if—

(1) an individual does not file a joint return for any taxable year, 

(2) such individual does not include in gross income for such taxable year an item 

of community income properly includible therein which, in accordance with the 

rules contained in section 879 (a), would be treated as the income of the other 

spouse, 

(3) the individual establishes that he or she did not know of, and had no reason to 

know of, such item of community income, and 

(4) taking into account all facts and circumstances, it is inequitable to include 

such item of community income in such individual’s gross income, 

then, for purposes of this title, such item of community income shall be included 

in the gross income of the other spouse (and not in the gross income of the 

individual). Under procedures prescribed by the Secretary, if, taking into account 

all the facts and circumstances, it is inequitable to hold the individual liable for 

any unpaid tax or any deficiency (or any portion of either) attributable to any item 

for which relief is not available under the preceding sentence, the Secretary may 

relieve such individual of such liability. 
- 8 -

The Parkers further urge that Idaho law should include the equivalent of 26 U.S.C. § 6015, 

entitled “Relief from joint and several liability on joint return,” section (f) of which states:

(f) Equitable relief 

Under procedures prescribed by the Secretary, if—

(1) taking into account all the facts and circumstances, it is inequitable to hold the 

individual liable for any unpaid tax or any deficiency (or any portion of either); 

and 

(2) relief is not available to such individual under subsection (b) or (c), 

the Secretary may relieve such individual of such liability. 

The Parkers point to I.C. § 63-3002 to support their claim that the above provisions should be 

read into Idaho law and applied in this case in order to afford them relief.

Idaho Code § 63-3002 states:

It is the intent of the legislature by the adoption of this act, insofar as possible to 

make the provisions of the Idaho act identical to the provisions of the Federal 

Internal Revenue Code relating to the measurement of taxable income, to the end 

that the taxable income reported each taxable year by a taxpayer to the internal 

revenue service shall be the identical sum reported to this state, subject only to 

modifications contained in the Idaho law; to achieve this result by the application 

of the various provisions of the Federal Internal Revenue Code relating to the 

definition of income, exceptions therefrom, deductions (personal and otherwise), 

accounting methods, taxation of trusts, estates, partnerships and corporations, 

basis and other pertinent provisions to gross income as defined therein, resulting 

in an amount called “taxable income” in the Internal Revenue Code, and then to 

impose the provisions of this act thereon to derive a sum called “Idaho taxable 

income”; to impose a tax on residents of this state measured by Idaho taxable 

income wherever derived and on the Idaho taxable income of nonresidents which 

is the result of activity within or derived from sources within this state. All of the 

foregoing is subject to modifications in Idaho law including, without limitation, 

modifications applicable to unitary groups of corporations, which include 

corporations incorporated outside the United States.

This statute says nothing about the application of federal provisions for equitable relief. Further, 

we have made clear that the statute “does not incorporate by reference all provisions of the 

federal Internal Revenue Code into Idaho tax law.” Lockheed Martin Corp. v. Idaho State Tax 

Comm’n, 142 Idaho 790, 796, 134 P.3d 641, 647 (2006). Instead, as the district court properly 

observed, this Court has relied upon I.C. § 63-3002 to adopt federal tax provisions where Idaho 

law is silent, but has declined to adopt the federal tax code when it conflicts with Idaho law. See,

e.g., Idaho State Tax Comm’n v. Hautzinger, 137 Idaho 401, 403, 49 P.3d 406, 408 (2002) 

(adopting federal elements of tax fraud because Idaho law did not provide those elements);

Lockheed, 142 Idaho at 797, 134 P.3d at 648 (declining to adopt federal requirement that 
- 9 -

taxpayers receiving payments under long term contracts report property under construction in 

computing income because under I.C. § 63-3027 property under construction is excluded). Idaho 

law does have its own provisions for equitable relief: I.C. §§ 63-3047 and 63-3048. The district 

court declined to read the above federal provisions into Idaho law because it found that I.C. §§ 

63-3047 and 63-3048 conflict with those provisions for the reason that, while not explicitly 

aimed at offering equitable relief to a non-resident facing taxation due to operation of Idaho 

community property law, they do “provide for a method by which the taxpayer and the 

Commission may compromise a dispute.” 

More than conflicting with the Idaho Code, the federal provisions urged by the Parkers

do not apply to the Parkers’ situation. The federal provisions are designed to offer an individual 

spouse equitable relief from tax liability attributable to the other spouse. That is, as between 

spouses, these regulations permit the Internal Revenue Service to allocate responsibility for 

payment of federal taxes. Christensen v. C.I.R., 523 F.3d 957, 960 (9th Cir. 2008) (“The 

Commissioner has the authority to relieve one spouse from tax liability attributable to the other. 

See, e.g., [26 U.S.C.] §§ 66(c), 6015(b), (c), (f).”) Rev. Proc. 2003-61, 2003 I.R.B. 296 §

4.02(1)(b) (“[T]he Service ordinarily will grant equitable relief under section 6015(f) ... [if] the 

requesting spouse had no knowledge or reason to know that the nonrequesting spouse would not 

pay the income tax liability.”) If one spouse is granted equitable relief, the other spouse is 

liable; the amount to which the federal treasury is entitled is not reduced. In this case, the 

Parkers ask us to grant Kathy relief from tax liability on one-half of David’s Nevada earnings 

and attribute that liability to David instead. If the Court were to do this, however, unlike under 

the federal scheme, the State would lose out on that revenue altogether, since David is a Nevada 

resident and any state tax liability on his Nevada-sourced income would be owed to Nevada.4 

Furthermore, 26 U.S.C. § 66(c) allows income attributable to one spouse to be attributed 

to the other spouse if the first spouse “does not file a joint return for any taxable year.” 

Christensen, 523 F.3d at 962 (“Taken together, the similar and separate equitable provisions 

indicate that Congress intended spouses facing joint liability from community property laws to 

seek equitable relief under § 66(c) and spouses facing joint liability from joint tax returns to seek 

equitable relief under § 6015(f).”) Kathy would be ineligible for relief under § 66(c) because she 

and David filed joint returns for the relevant years. Kathy has further failed to establish “that . . . 

 

4 The parties have stipulated that Nevada does not impose an income tax.
- 10 -

she did not know of, and had no reason to know of” the fact that David was earning income in 

Nevada. Again, for this reason she would not be eligible for relief under § 66(c). Hardy v. 

C.I.R., 181 F.3d 1002, 1007-08 (1999) (“Because Hardy was aware that Mr. Hardy was 

employed and earning income, she had reason to know of the taxable income. . . . Thus, the Tax 

Court properly concluded that she did not qualify for innocent spouse treatment under § 66(c).”)

Idaho Code § 63-3002 does not explicitly state that the State should adopt federal 

provisions for equitable relief from tax liability. That statute has been read as not requiring 

adoption of every federal tax procedure, and this Court has declined to adopt federal procedures 

when those procedures conflict with prescriptions in Idaho law. Idaho Code §§ 63-3047 and 63-

3048 provide a mechanism by which the Commission can grant equitable relief, and thus we 

decline to read federal provisions as preempting them, in particular when those provisions are 

not applicable to the case at hand. Based on the foregoing, we affirm the district court’s decision 

not to adopt the federal provisions urged by the Parkers. 

E. We award the Commission attorney fees on appeal. 

It should first be noted that although the Commission does not specify whether it seeks 

attorney fees for the proceedings below as well as on appeal, there is no indication that it raised 

any request for attorney fees with the district court. Thus, we only consider whether to award 

attorney fees on appeal. The Commission asks for an award of attorney fees pursuant to I.C. § 

63-3049, which states in relevant part that: 

(a) Redetermination by the state tax commission may be reviewed in the 

district court for Ada county or the county in which the taxpayer resides or has his 

principal office or place of business by a complaint filed by the taxpayer against 

the state tax commission . . . .

. . . . 

(d) Whenever it appears to the court that:

(1) Proceedings before it have been instituted or maintained by a party primarily 

for delay; or 

(2) A party’s position in such proceeding is frivolous or groundless; or 

(3) A party unreasonably failed to pursue available administrative remedies; 

the court, in its discretion, may require the party which did not prevail to pay to 

the prevailing party costs, expenses and attorney’s fees.

The Commission argues that not only is the holding in Herndon v. West, 87 Idaho at 340, 393 

P.2d at 40, (that the State may tax the income of a resident regardless of where it derives from)

well-settled law, the Parkers failed to disclose the case in their opening brief, thereby taking a 

frivolous position.
- 11 -

We agree. Despite the fact that Herndon is dispositive of the due process issue in this 

case, the Parkers fail to address it in their opening brief other than to mention that the district 

court relied on it in making its decision. Additionally, the Parkers urged this Court to consider 

an issue raised for the first time on appeal, despite long-standing precedent that we will not do 

so. Finally, the Parkers urged a violation of the Commerce Clause without showing how it 

applies to this case. Therefore, pursuant to I.C. § 63-3049(d)(2), we award the Commission 

attorney fees on appeal. 

IV. CONCLUSION

We decline to consider whether the district court erred in applying Idaho community 

property law. We affirm the district court’s decision that taxing Kathy’s income does not violate 

due process; decline to address whether the court erred in refusing to strike portions of Gunter’s 

affidavit; affirm the district court’s conclusion that the Commerce Clause is not violated in this 

case; and affirm the court’s decision not to read federal equitable relief provisions into Idaho 

law. Attorney fees and costs on appeal to the Commission. 

Chief Justice EISMANN and Justices BURDICK, J. JONES and W. JONES CONCUR.