Court Opinion

ID: 9613688
Source: CourtListenerOpinion
Date Created: 2023-08-22 04:19:13.22132+00
Date Added: 2024-06-11T18:03:31.031571
License: Public Domain

BISTLINE, Justice,
dissenting.
The proper conclusion in this case is that prior to the 1986 enactment of water’s edge legislation by the Idaho legislature, Simplot did not have the right to exclude from its unitary business tax scheme the foreign source income of Simplot Chemical, its Canada-based subsidiary. This conclusion is the correct one, even assuming that the income from the foreign subsidiary was not considered “federal taxable income” within the definition in 26 U.S.C. § 63. Therefore, the district court’s affirmance of the Tax Commission’s determination that Simplot must pay additional taxes for the tax years ending August 31 in 1977, 1978,1980,1981, and 1982 should be affirmed.
The portion of the tax deficiency that is disputed comes from Simplot’s only foreign subsidiary, Simplot Chemical.8 As stipula*867tion of fact number 9 states, without the inclusion of Simplot Chemical in Simplot’s unitary business tax scheme, the tax deficiency is significantly reduced. The arguments of the parties are simple, and it is appropriate to reiterate their respective contentions.
Simplot relies heavily upon stipulated fact number 13, which states that Simplot Chemical, Simplot’s only foreign affiliate, had no federal taxable income. Foreign source income is not recognized as taxable income by the federal tax code. Therefore, Simplot alleges that it cannot now be taxed by the state of Idaho for the business income of Simplot Chemical because Idaho tracks the federal definition of taxable income.
The Tax Commission argues that the passage of water’s edge legislation in 1986 clarified the state of the law which was in existence prior to the effective date of that legislation. Water’s edge legislation allows businesses to elect to exclude foreign source income from business income. Therefore, before water’s edge legislation was enacted in Idaho, businesses did not have the choice — they were required to include foreign source income as part of their preapportionment business income. The Tax Commission also points out that Simplot needlessly complicated the underlying issue by centering upon the definition of “taxable income” instead of the definition of “business income.” The phrase “taxable income” as used in I.C. § 63-3002 declares the legislature’s intent to apply “the various provisions of the Federal Internal Revenue Code relating to the definition of income, ... resulting in a final amount called ‘taxable income’ in the Internal Revenue Code; [and] to impose a tax on residents of this state measured by taxable income wherever derived.” The phrase “business income” appears in I.C. § 63-3027, the statute governing the computation of “taxable income” of any corporation with a business situs in Idaho. According to stipulation of fact number 1, Simplot is a corporation with a business situs in Idaho.
The Tax Commission and the district court were correct in framing the question presented as whether the modifications made by the water’s edge legislation in 1986 preclude Simplot, prior to the effective date thereof, from excluding foreign source income from business income. Usually, “[w]hen the legislature changes the language of a statute, it is presumed that they intended to change the application or meaning of that statute.” Wood-vine v. Triangle Dairy, Inc., 106 Idaho 716, 721, 682 P.2d 1263, 1268 (1984) (citations omitted). No party disputes the fact that the legislature changed the tax laws in Idaho by adding water’s edge legislation in 1986. Therefore, the question is whether, before water’s edge was in effect, Simplot had the right to exclude from their unitary business tax scheme the foreign source income of Simplot Chemical. The district court reasoned:
In 1986, the legislature granted to qualified taxpayers the right to elect water’s edge treatment of the determination of income attributable to sources within this state. [Act of April 4, 1986, ch. 342, 1987 Idaho Sess.Laws 846.] The only purpose for the water’s edge election statute is to avoid the inclusion of income of subsidiary foreign corporations in the allocation and apportionment process of [I.C. §] 63-3027. If the legislature believed that foreign source income by definition was excluded from the allocation and apportionment process of the then-existing version of [I.C. §] 63-3027, there was absolutely no reason to pass water’s edge legislation.
District Court Memorandum Decision, R. 94.
That reasoning is sound. Applying the same five malleable “principles” which the majority delineate as guidelines for determining whether to follow the rule of judicial deference to agency interpretations, the opposite result is the more reasoned one: the Tax Commission’s position regarding inclusion of foreign source income in the preapportionment tax base prior to the 1986 water’s edge legislation, and the dis*868trict court’s affirmance thereof should be affirmed.

. The stipulation of facts, numbers 1 through 13, entered into by the parties in the district court proceeding are set out in the Court’s opinion.