Idaho State Tax Commission

Combined Reporting

Income and factors

Net operating losses and capital losses

Each corporation included in the combined report that is required to file an Idaho income tax return must separately compute its Idaho net operating loss (NOL). Each corporation's NOL carryback and carryover is applied to its share of the combined income apportioned to Idaho for each tax year.

Capital losses incurred in a year when the corporation didn't have an Idaho connection aren't deductible, unless the corporation was part of a unitary group with at least one member of the group taxable by Idaho for that tax year.

Partnership interests

If a corporation is a member of a partnership or joint venture, the corporate partner includes its share of partnership income in apportionable income. Additionally, the corporate partner includes its share of partnership property, payroll and sales, after intercompany eliminations, in the numerators and denominators of the corporation's factors.

The corporation isn't required to hold more than a 50% interest in the partnership or joint venture to include its share of partnership income and factor attributes in the combined report. A partnership interest is included in the combined report if the operation of the partnership or joint venture is an extension of the unitary business of the partner or venture member.

Different accounting periods

You must determine the income of all corporations in a combined group using the same accounting period. If a parent-subsidiary relationship exists, the income of all corporations generally is determined based on the parent's tax year. If there isn't a common parent corporation, as in the case of brother/sister corporations, the income of the related corporations generally is determined based on the tax year of the corporation required to file an Idaho return and expected to have the largest amount of Idaho income.

In converting the income of a member of the related group to conform to the tax year of the parent or other related corporation, income generally is determined based on the number of months falling within the applicable tax year. For example, if a parent corporation operates on a calendar year basis and a subsidiary includible in a combined report operates on an April 30 fiscal year, assign 8/12 of the subsidiary's income of the current fiscal year and 4/12 of the unitary income of the preceding fiscal year to include a full 12-months' income in the combined report. If this calculation results in using the income of a corporation whose fiscal year hasn't yet closed, you may need to make an estimate based on available information and amend the return later.

After you've determined the combined income of the unitary group of corporations based on a common taxable year, next you'll need to apportion the combined income to Idaho by applying the apportionment formula. Compute the factors of the formula using the same common tax year as you used to compute unitary income.

Special industries

If part of your business is in one of the following industries, you must use special apportionment rules in computing the apportionment factors:

  • Airlines
  • Construction Contractors
  • Financial Industries
  • Publishers
  • Railroads
  • Television and Radio Broadcasters
  • Trucking Companies

Idaho typically follows the Multistate Tax Commission regulations for these industries, with a few exceptions discussed in the Idaho Income Tax Administrative Rules.

Property Factor

The property factor is a fraction.

  • The numerator is the average value of real and tangible personal property owned or rented and used in Idaho during the tax year to produce business income.
  • The denominator is the average value of all the taxpayer's real and tangible personal property owned or rented and used during the tax year to produce business income.

Include: Property that's used or capable of being used during the tax year in the regular course of the taxpayer's trade or business

Exclude:

  • Property used to produce nonbusiness income
  • Property under construction

How to value property

Value property that the taxpayer owned at its original cost. Original cost is the basis of the property for federal income tax purposes (before any federal adjustments) when the corporation acquired it. Adjust original cost for subsequent capital additions or improvements, special deductions, or partial disposition because of sale, exchange, abandonment, or other cause. Depreciation doesn't reduce original cost.

Average value of property

Calculate the average value of property that the taxpayer owned by averaging the values at the beginning and ending of the tax year. The Tax Commission might require or allow the averaging of monthly values to reflect the average values properly.

Rented property

Value rental property at eight times the net annual rental rate. The net annual rental rate is the total rents paid for the property minus the aggregate annual subrental rates that subtenants paid. You can't deduct subrents when they're business income.

Payroll Factor

The payroll factor is a fraction.

  • The numerator is the Idaho compensation paid during the tax year.
  • The denominator is the total compensation paid during the tax year.

Exclude:

  • Compensation connected with the production of nonbusiness income

Accounting method

Determine the total amount paid to employees based on the taxpayer's accounting method: Accrual method or cash method

Accrual method:

  • All compensation properly accrued is deemed to have been paid.

Cash method:

  • If you must report compensation under the cash method for unemployment compensation purposes, you can use the cash method to include compensation paid to employees in the payroll factor.

Compensation

Compensation includes:

  • Wages
  • Salaries
  • Commissions
  • Any other form of payment to employees for personal services

Exclude: Payments to an independent contractor or any other person not properly classifiable as an employee.

Compensation is paid in Idaho if any one of the following tests is met:

  • The individual's service is performed entirely inside Idaho.
  • The individual's service is performed both inside and outside Idaho. But, the service performed outside Idaho is incidental to the individual's service in Idaho.
  • Some of the service is performed in Idaho, and:
    • The base of operations—or the place where the service is directed or controlled—is in Idaho.
    • The base of operations—or the place where the service is directed or controlled—isn't in any state in which some part of the service is performed, but the individual's residence is in Idaho.
Sales Factor

The sales factor is double-weighted for all taxpayers except electrical and telephone utilities. Electrical and telephone utilities use a single-weighted sales factor.

The sales factor is a fraction.

  • The numerator is the gross receipts derived during the tax year from transactions and activities attributable to Idaho in the regular course of the taxpayer's trade or business.
  • The denominator is the total gross receipts derived during the tax year from transactions and activities everywhere in the regular course of the taxpayer's trade or business.

Include:All gross receipts derived from transactions and activities in the regular course of trade or business.

Exclude: Receipts derived from the production of nonbusiness income.

Gross receipts

Gross receipts are gross sales minus returns and allowances. The sales factor includes gross receipts from services and all other gross receipts such as interest, dividends, rents, royalties, gross receipts from the sale of property and other income derived by the taxpayer in the regular course of business.

Gross receipts from sales of tangible personal property are assigned to Idaho if:

  • Property is delivered or shipped to a buyer in Idaho. This is regardless of where property ownership transfers from the seller to the buyer. This is also regardless of other conditions of sales.
  • Property is shipped from an office, store, warehouse, factory or other place of storage in Idaho and one of these is true:
    • The taxpayer isn't taxable in the state of the buyer (throwback sales).
    • The buyer is the U.S. government.

If gross receipts don't fairly represent the extent of your business activity in Idaho, you can request or might be required to use another method to obtain an equitable result. Income from services is attributable to this state if the services are performed in Idaho.

Although the following amounts might be business income, gross receipts don't include:

  • The repayment, maturity, or redemption of the principal of a loan, bond, mutual fund, certificate of deposit, or similar marketable instrument
  • The principal amount received under a repurchase agreement
  • The proceeds from issuing your own stock or from the sale of treasury stock
  • Damages or other amounts received from litigation
  • Property that an agent acquired on behalf of another
  • Tax refunds or other tax benefit recoveries
  • Pension reversions
  • Contributions to capital
  • Income from the forgiveness of indebtedness
  • Amounts realized from exchanges of inventory that the Internal Revenue Code (IRC) doesn't recognize

Page last updated September 1, 2020. Last full review of page: September 17, 2018.

This information is for general guidance only. Tax laws are complex and change regularly. We can't cover every circumstance in our guides. This guidance may not apply to your situation. Please contact us with any questions. We work to provide current and accurate information. But some information could have technical inaccuracies or typographical errors. If there's a conflict between current tax law and this information, current tax law will govern.