2023 Idaho Code › Title 63 - REVENUE AND TAXATION › Chapter 30 - INCOME TAX › Section 63-3027C - ELECTION IS BINDING — TREATMENT OF DIVIDENDS.

63-3027C. ELECTION IS BINDING — TREATMENT OF DIVIDENDS. (a) A water’s-edge election shall be made in the original return for a year and shall be binding for all years thereafter, except as follows:
(1) If, in the future, the United States supreme court or the supreme court of the state of Idaho rules that there is a state or federal constitutional right for a group of corporations to use the worldwide unitary method, a water’s-edge combined group of corporations may, without permission of the tax commission, change its future filing to the worldwide unitary method.
(2) Any changes to use of the water’s-edge method or any other changes beyond those described in paragraph (1) of this subsection may only occur with the written permission of the tax commission.
(3) No water’s-edge election shall be made for an income year beginning prior to the operative date of sections 63-3027B through 63-3027E, Idaho Code.
(b) When disregarding an election or granting a change of election, the tax commission shall impose conditions which are necessary to prevent the avoidance of tax or to clearly reflect income for the period the election was made.
(c) For purposes of this section:
(1) Dividends received from payors incorporated outside the fifty (50) states and District of Columbia, to the extent taxable, shall be treated as income subject to apportionment.
(2) The income of corporations filing elections under section 936 of the Internal Revenue Code shall be deemed dividends received from payors incorporated outside the fifty (50) states and District of Columbia.
(3) Eighty-five per cent (85%) of all dividends described in subsection (c)(1) or (c)(2) of this section shall be excluded from income subject to apportionment.
(4) The dividends subject to apportionment shall be in lieu of any expenses attributable to such dividend income.
(5) Any actual dividend received from a corporation filing an election under section 936 of the Internal Revenue Code shall be eliminated from income.
(d) Any dividend from any payor required to be combined under the water’s-edge election shall be eliminated from the calculation of apportionable income. Dividends received from a corporation described in section 922 of the Internal Revenue Code (defining "FSC") will be treated as follows:
(1) Dividends received from an FSC will be eliminated in the proportion that FSC federal taxable income for the year, out of which the dividend was paid, bears to the total FSC income before taxes for such year.
(2) The portion of FSC dividend not eliminated under paragraph (1) of this subsection will be subject to the eighty-five per cent (85%) exclusion provided for in subsection (c)(3) of this section.
(e) For purposes of this section:
(1) Amounts included in income by reference to subpart F of part III of subchapter N of chapter 1 of the Internal Revenue Code shall constitute dividends from payors outside the fifty (50) states and District of Columbia;
(2) Amounts included in income under part VI of subchapter P of chapter 1 of the Internal Revenue Code shall constitute dividends from payors outside the fifty (50) states and the District of Columbia; and
(3) Deemed distributions defined by Section 78 of the Internal Revenue Code shall be excluded from the income of the water’s-edge combined group.
History:
[63-3027C, added 1986, ch. 342, sec. 1, p. 848; am. 1993, ch. 284, sec. 5, p. 971; am. 1994, ch. 247, sec. 4, p. 788; am. 1997, ch. 59, sec. 1, p. 110.]