Opinion ID: 1281151
Heading Depth: 1
Heading Rank: 8

Heading: the court's fear of the state taxing any person who crosses idaho by any means without stopping or transacting business here, but who is being compensated while in transit is without foundation.

Text: Idaho Code § 63-3030 sets forth the minimum amount of income a nonresident individual must earn from Idaho sources before an income tax can be levied, i.e., a de minimis provision. Idaho Code § 63-3030 has been part of the income tax act since its enactment in 1959, and has been periodically amended to increase the minimum income that a taxpayer must earn prior to being subject to a filing obligation. In addition, House Bill 655 of the 1988 Legislature enacting Idaho Code § 63-3023B sets forth further limitations specifically aimed at transportation employees. As enacted in 1959, the de minimis provision provided that a nonresident individual could earn income from Idaho sources of up to $600 before a tax reporting obligation would occur. Currently, a nonresident single individual must have income from Idaho sources amounting to at least $3,300 before a tax reporting obligation occurs. A nonresident individual filing a joint return must earn at least $5,400 from Idaho sources before a tax reporting obligation occurs. Thus, a nonresident individual crossing Idaho and being compensated while in transit would not be subject to Idaho tax until his income from Idaho sources is substantial enough to exceed the statutory minimum. De minimis provisions with regard to the Due Process Clause were specifically addressed in the case of Commonwealth, Dept. of Taxation v. B.J. McAdams, Inc., 227 Va. 548, 317 S.E.2d 788 (1984). There, the Supreme Court of Virginia stated that a de minimis provision was added to the taxation scheme [i]n order to conform to the Due Process requirements of the Fourteenth Amendment to the Federal Constitution... . Id. 317 S.E.2d at 792. What must be remembered is that the train crews in question are not merely passing through Idaho on a sporadic or inconsistent basis. Quite the opposite is true. The train crews are passing through Idaho on a regular and systematic basis. Depending upon whether a time or mileage apportionment factor is used, between 25% and 40% of the wages earned by the train crew members are being earned while they are in Idaho. As an example of the presence necessary in Idaho to meet the current minimum filing requirements, if a train crew member (filing single) earned $60,000 a year, and a bare minimum 25% apportionment factor was used, the train crew member would be able to work continuously across Idaho for well over 2 months prior to incurring any Idaho tax liability. Using the same facts, a train crew member filing jointly could work continuously across Idaho for over a third of the year prior to incurring any Idaho tax liability. A second example to be considered is the distinction between the engineer operating a through train that does not stop, as opposed to a second engineer operating a train that makes one momentary stop, but who never moves from his seat and then continues on his journey through the state. The Opinion of this Court implies that one stop is sufficient to tax the second engineer, yet the first goes tax free. Because the Court failed to set forth its reasoning behind the result, the Tax Commission can only guess as to how this area of the law should be administered in the future. During reargument, a question was raised concerning a banker riding on a train and working while crossing Idaho. The Court inquired, ignoring the de minimis statutes, how often the banker could work while traveling through Idaho before incurring an Idaho tax liability. Admittedly, an incomplete response was given. To properly answer the question, it must be addressed both statutorily and in the due process context. Statutorily, as discussed earlier in this brief, any individual performing labor or personal services within the state has Idaho source income which is subject to Idaho income tax. Gee v. West, supra . Therefore, any wages received for labor performed within Idaho would be subject to income tax under the taxing statutes, absent the de minimis provision. This response was given during reargument. However, the de minimis provisions cannot be ignored in the due process context because that is what sets the floor to satisfy the minimum contacts necessary to support nexus. Without the de minimis provisions, a nonresident individual coming into Idaho to work for one day, thereby earning $100.00, would incur an Idaho income tax liability. Statutorily, it makes no difference if he digs a ditch or operates a through train. That individual has Idaho source income subject to Idaho's income tax. On the other hand, with the de minimis provisions, the nonresident individual would not be subject to tax until such time as he earned sufficient income to exceed the minimum filing requirements, thereby meeting the minimum contacts necessary to satisfy the nexus requirement of the Due Process Clause. Again, it makes no difference if the individual digs a ditch or operates a through train. Due process requirements are satisfied if the nonresident individual has earned income from Idaho sources which meet or exceed the de minimis statutory filing requirements.