Idaho State Tax Commission

Combined Reporting

Worldwide vs. water's edge

Worldwide combined reporting

Idaho requires use of the worldwide filing method for all corporations unless you've made the water's edge election (discussed in the next section). Under this method, you must include the income or loss and apportionment factor attributes of all unitary corporations with more than 50% common ownership. This includes those businesses incorporated outside the United States.

Corporations incorporated in the United States or included in a consolidated federal corporation income tax return must include federal taxable income in the combined report. You can choose one of the following amounts to include in apportionable income for your foreign corporations. The method you select must be used for all the foreign corporations and adjusted for Idaho additions and subtractions to taxable income required by Idaho Code.

  • Financial net income before income taxes shown on consolidated financial statements filed with the U.S. Securities and Exchange Commission (SEC). If the unitary group isn't required to file with the SEC, it can use the profit or loss statement prepared for reporting to shareholders and subject to review by an independent auditor.
  • Restated financial net income of each foreign corporation to a federal income tax basis. If you choose this option, you must make all book-to-tax adjustments for each foreign corporation. You also must apply the adjustments consistently in each year that the worldwide method applies. These adjustments are subject to the recordkeeping requirements of the Internal Revenue Code (IRC) and Treasury regulations for domestic corporations.
Water's edge election

Corporations doing business inside and outside of Idaho can elect to file on a water's edge basis instead of a worldwide basis. If you choose this election, exclude your foreign corporations from the combined report unless they're included in a federal consolidated return.

With the water's edge method, you exclude from apportionable income the portion of dividends received or deemed received from foreign corporations. The percentage of dividends you exclude depends on whether you file a domestic disclosure spreadsheet.

  • If you file the spreadsheet, you receive an 85% dividend exclusion. You must file the spreadsheet within six months of filing the original return.
  • If you don't file the spreadsheet, you receive an 80% dividend exclusion. Check the "Yes" box on Idaho Form 41, line 8b, to opt out of filing the spreadsheet. You must make this election annually.

You must make the water's edge election on an original return. You can't make the election on an amended return.

After making the election, you must continue using the water's edge method. You can change your election only if you receive written permission from the Tax Commission. See Form 14, Idaho Water's Edge Election and Consent Form, for instructions.

Forms and instructions

Laws and rules

Laws and rules are housed on an external website.

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.