Opinion ID: 1179739
Heading Depth: 2
Heading Rank: 1

Heading: Potlatch Corporation v. Tax Commission

Text: Section 409 of the Internal Revenue Code (now repealed) gave a taxpayer the option of taking a tax credit (I.R.C. § 44Gredesignated § 41 in 1985, repealed in 1986) or a deduction (I.R.C. § 404) for contributions made to an employee stock ownership program (ESOP). If the taxpayer deducted the ESOP contributions, its federal taxable income was reduced by that amount. If the taxpayer took a credit, the amount of taxes owed was reduced by the amount of the credit. On its federal returns for the years 1983 to 1985, Potlatch Corporation (Potlatch) claimed an ESOP credit rather than taking a deduction. The Idaho tax statutes do not contain a provision for tax credits for ESOP contributions. Therefore, Potlatch claimed its contributions as deductions on its state returns. The Idaho State Tax Commission (the Commission) ruled that Potlatch was not entitled to these deductions because it had not claimed the deductions on its federal returns. Potlatch sued in district court pursuant to I.C. § 63-3049 (Supp.1995) seeking relief from the Commission's ruling. The district court ruled that Potlatch was entitled to the deductions for the ESOP contributions. After concluding that it need not defer to the Commission's decision under the analysis set forth in J.R. Simplot Co., Inc. v. Idaho State Tax Comm'n, 120 Idaho 849, 820 P.2d 1206 (1991), the district court granted Potlatch summary judgment, ruling that the rationale of Bogner required that Potlatch not be denied a state deduction simply because it had elected a credit option at the federal level. The Commission appealed.