S Corporations Operating Within And Without Idaho (Rule 286)

Sections 63-3027 and 63-3030(a)(4), Idaho Code 01. In General. An S corporation that operates within and without Idaho must apply the principles of allocation and apportionment of income set forth in Section 63-3027, Idaho Code, and related rules to determine the extent of S corporation income that is derived from or related to Idaho sources. The use of a combined report, however, is available only to C corporations. (4-6-23) 02. Information Provided to Shareholders. An S corporation must provide to each shareholder information necessary for the shareholder to compute his Idaho income tax. Such information must include: (4-6-23) a. The shareholder’s share of each pass-through item of income and deduction; (4-6-23) b. The shareholder’s share of each Idaho addition and subtraction; (4-6-23) c. The shareholder’s share of Idaho qualifying contributions, Idaho tax credits, and tax credit recapture; (4-6-23) d. The shareholder’s share of income allocated to Idaho; (4-6-23) e. The S corporation’s apportionment factor; and (4-6-23) f. The shareholder’s distributive share of S corporation gross income. (4-6-23) 03. Protection Under Public Law 86-272. An S corporation whose Idaho business activities fall under the protection of Public Law 86-272 is exempt from the taxes imposed by Sections 63-3025 and 63-3025A, Idaho Code, including the minimum tax. (4-6-23) 04. Qualified Subchapter S Subsidiary. A corporation that is a qualified subchapter S subsidiary (QSSS) must include its apportionment attributes with its parent’s apportionment attributes to compute one Idaho apportionment factor for the S corporation. If the S corporation and its qualified subchapter S subsidiaries are carrying on more than one unitary business, each unitary business must allocate and apportion its income pursuant to Rule 340.03. (4-6-23) 287. -- 290. (RESERVED) 291. TAX PAID BY PASS-THROUGH ENTITIES FOR OWNERS OR BENEFICIARIES -- COMPUTATION OF IDAHO TAXABLE INCOME FOR TAXABLE YEARS BEGINNING ON OR AFTER JANUARY 1, 2014 (RULE 291). Sections 63-3022L and 63-3026A, Idaho Code 01. Income Reportable to Idaho. The following items must be included in the computation of Idaho taxable income for an individual: (4-6-23) a. Pass-through items that are income from Idaho sources of an owner as determined pursuant to Rule 263 of these rules. (4-6-23) IDAHO ADMINISTRATIVE CODE IDAPA 35.01.01 Idaho State Tax Commission Income Tax Administrative Rules Section 291 Page 46 b. Distributable net income from an estate or trust that is income from Idaho sources. (4-6-23) 02. Deductions. Pass-through entities paying the tax under Section 63-3022L, Idaho Code, are not entitled to claim the following deductions on behalf of an individual. (4-6-23) a. Capital Loss. As provided in Section 63-3022(i), Idaho Code, S corporations and partnerships are not allowed to carry over or carry back any capital loss provided for in Section 1212, Internal Revenue Code. (4-6-23) b. Net Operating Loss. As provided in Section 63-3022(i), Idaho Code, S corporations and partnerships are not allowed to carry over or carry back any net operating loss provided for in Section 63-3022(c), Idaho Code. (4-6-23) c. Idaho Capital Gains Deduction. As provided in Section 63-3022H, Idaho Code, the Idaho capital gains deduction may only be claimed by individual taxpayers on an individual income tax return. (4-6-23) d. Informational Items. Amounts provided to owners of pass-through entities and beneficiaries of trusts and estates on the federal Schedule K-1 that are informational only may not be used as a deduction in computing the taxable income reportable under Section 63-3022L, Idaho Code. Informational items include the domestic production activities information and net earnings from self-employment. (4-6-23) e. Items Not Deductible Under the Internal Revenue Code. A deduction is not allowed for items disallowed under the Internal Revenue Code. For example, a deduction is not allowed for items disallowed as a deduction in Sections 162(c) and 262 through 280E, Internal Revenue Code, unless specifically allowed by Idaho law. Items allowed by Idaho law include expenses related to tax-exempt income under Section 265, Internal Revenue Code, which are allowed to be deducted as a result of Section 63-3022M, Idaho Code. (4-6-23) f. Items Not Reported as a Pass-Through Deduction. Amounts not reported from the pass-through entity to the pass-through owner are not allowed as a deduction under Section 63-3022L, Idaho Code. These include: (4-6-23) i. The standard deduction; (4-6-23) ii. Personal exemptions; (4-6-23) iii. Itemized deductions that result from activity of the pass-through owner. For example, a deduction is not allowed for charitable contributions made personally by the pass-through owner, but is allowed for the pass- through owner’s share of charitable contributions made by the pass-through entity. (4-6-23) g. Items Reported as a Pass-Through Deduction. Amounts reported from the pass-through entity to the pass-through owner in their distributive share are allowed as a deduction under Section 63-3022L, Idaho Code, unless otherwise disallowed under this rule. These include but are not limited to: (4-6-23) i. Section 179, Internal Revenue Code, deduction; (4-6-23) ii. Charitable contributions made by the pass-through entity; (4-6-23) iii. Investment interest expense; (4-6-23) iv. Section 59(e)(2), Internal Revenue Code, expenditures (qualified research expenditures); (4-6-23) v. Amounts paid for medical insurance; (4-6-23) vi. Educational assistance benefits; (4-6-23) vii. Payments to a pension or IRA. (4-6-23) IDAHO ADMINISTRATIVE CODE IDAPA 35.01.01 Idaho State Tax Commission Income Tax Administrative Rules Section 300 Page 47 03. Double Deductions Disallowed. A pass-through owner may not deduct amounts that previously have been deducted by a pass-through entity paying the tax on his behalf. If the pass-through owner files an Idaho individual income tax return reporting federal taxable income that includes amounts previously deducted by a pass- through entity on his behalf, the pass-through owner must add back the duplicated deduction amounts in computing his Idaho taxable income on his individual income tax return. (4-6-23) 292. -- 299. (RESERVED)