Investment Tax Credit Carryover and Instructions 2024

This guide provides some basic Idaho income tax information for interstate trucking companies and explains how to calculate your Idaho apportionment factor.

Terms used in this guide

Trucking company – A motor common carrier, a motor contract carrier, or an express carrier paid primarily to transport other’s tangible personal property.

Mobile property – All motor vehicles, including trailers, used directly in moving tangible personal property.

Mobile property mile – The movement of a unit of mobile property a distance of one mile, whether loaded or unloaded. These usually are the same as the miles reported on an International Fuels Tax Agreement (IFTA) tax return.

Original cost – The basis (for federal income tax purposes) of the property when it was bought. Or, if the property has no such basis, the valuation of the property for Interstate Commerce Commission (ICC) purposes. Or, if the cost can’t be determined, the fair market value on the date it was acquired.

More information

See Income Tax Rule 580.01.d.

The Multistate Tax Commission provides more information on special rules for interstate trucking.

Your requirement to file

Idaho law requires a trucking company filing as a corporation or S corporation to file an Idaho income tax return if your company does any of these things during the year:

Owns or rents any real or personal property (except mobile property) in Idaho
Makes any pickups or deliveries in Idaho
Travels more than 25,000 mobile property miles in Idaho
Makes more than 12 trips into Idaho

You’ll apportion your income to Idaho.

You’re also required to file an Idaho income tax return if the total mobile property miles traveled in Idaho exceeds 3% of the total mobile property miles traveled by the company in all states.

Read more about apportionment in the “Calculating your apportionment” section below.

Other business entity types

You’re required to file an Idaho income tax return if your total business gross receipts multiplied by the Idaho apportionment factor exceeds $2,500 and you’re either of the following:

Nonresident individual operating as a sole proprietorship
Limited liability company filing as a disregarded entity on a federal Schedule C

Income subject to apportionment

Start with your federal taxable income from the business and add Idaho’s additions. Subtract both allocable nonbusiness income and Idaho’s subtractions.

This is the income you’ll multiply by your apportionment factor.

Calculating your apportionment

Idaho taxes part of your overall income. The percentage by which it’s taxed is called the apportionment factor. The three-factor apportionment is made up of three numbers, which then are divided by three:

Property factor
Payroll factor
Sales factor (single sales)

The property factor, payroll factor, and sales factor each are calculated to determine the Idaho part of that factor as determined by law. (See Idaho Income Tax Rule 580.01.d.)

Property factor

Owned property is valued at its original cost. Property rented from others is valued at eight times the net annual rental rate.

Include mobile property. The value of mobile property located both inside and out of Idaho during the year is included in “A” in the ratio that those miles in Idaho bear to property miles everywhere.

A divided by B

A is the average value of your property owned plus rented property that was used in Idaho during the year.
B is the average of all your real and tangible property owned plus rented property that was used everywhere during the year.

Payroll factor

This is compensation paid during the year.

Compensation paid to personnel both inside and out of Idaho during the year is included in “C” in the ratio that their services performed in Idaho bear to their services performed everywhere based on mobile property miles.

C divided by D

C is Idaho compensation during the year
D is compensation paid everywhere during the year

Sales factor

This is the company’s annual gross receipts.

Idaho receipts for hauling freight, mail, and express are determined at 100% for shipments that begin and end in Idaho. Idaho receipts for hauling these items when the shipment passes through, into, or out of Idaho is determined by the ratio that the mobile property miles traveled in Idaho bears to the total mobile property miles traveled everywhere.

E divided by F

E is the company’s Idaho gross receipts
F is the company’s gross receipts everywhere

Idaho apportionment example

ABC Inc. is an interstate trucking company based in Utah.

Mobile property miles

During the year it had 29,500 mobile property miles in Idaho and total mobile property miles of 120,000. The percentage of miles traveled in Idaho equals 24.5833% (29,500/120,000).

Property factor

ABC Inc. had a truck and trailer ($60,000) and a warehouse in Utah ($90,000).

Total	Idaho (percentage)
$150,000	$14,750 (9.8333%)

Payroll factor

ABC Inc. had Interstate payroll of $20,000 and administrative payroll of $10,000.

Total	Idaho (percentage)
$30,000	$4,917 (16.3900%)

Sales factor

ABC Inc. had interstate sales of $500,000.

Total	Idaho (percentage)
$500,000	$122,917 (24.5833%)

Final calculations

Percentages added together	50.8063%
Divided by…	3
Your Idaho apportionment factor	16.9354%

Filing

Here’s a listing of all our current year business income tax forms. Prior year forms also are available.

Please include a schedule with your Idaho income tax return showing how you determined your company’s Idaho property, payroll, and sales as used in the apportionment factor calculation.

Recordkeeping

Check our Business Income Tax — Recordkeeping page for guidance on how long to keep your records. Keep all records used to calculate the Idaho apportionment factor, income and deductions.

Laws and Rules

Idaho combined reporting

Learn more:

Idaho Code section 63-3027 and Idaho Income Tax Administrative Rules 310 through 620
Water’s Edge Election – Idaho Code section 63-3027B through Idaho Code section 63-3027E and Idaho Income Tax Administrative Rules 640 through 646
Idaho Corporation Income Tax

Court decisions

Underwood Typewriter Co. v Chamberlain, 254 U.S. 113 (1920) – apportionment of a single corporation’s income was justified rather than allocating profits based only on activity in a state
Bass, Ratcliff & Gretton Ltd. v. State Tax Commission, 266 U.S. 271 (1924) – Apportionment formula allowed to worldwide profits even though state activity reflected a loss
Butler Bros. v. McColgan, 17 Cal. 2d 664, 111 Pac. 2d 334, aff’d 315 U.S. 501 (1942) – defined unitary business through unity of ownership, operation, and use and determined unitary business of a single corporation and its various divisions
Edison California Stores v. McColgan, 30 Cal. 2d. 472, 183 Pac. 2d 16 (1947) – contribution or dependency test used to determine unitary business and applied to a multi-corporate group
Container Corp. of America v. Franchise Tax Board, 463 U.S. 159, 103, S. Ct. 2933 (1983) – explicit approval of worldwide unitary business principle based on flow of value from functional integration, centralized management, and economies of scale. “Rejects geographical or transaction accounting.” Domestic parent
Albertson’s Inc. v. Department of Revenue, 106 Idaho 810, 683 P.2d 846 (1984) – Idaho Supreme Court unanimous approval of the combined reporting method including distributive share of 50% interest in partnership’s income, deductions and apportionment factors
Allied-Signal Inc. v. Director Division of Taxation, 504 U.S. 768 (1992) – provided that apportionment is appropriate when income from an asset serves an operational rather than an investment function in the taxpayer’s business
Barclays Bank PLC v. Franchise Tax Board of California, 512 U.S. 298 (1994) – upheld unitary business principle when there exists a foreign parent

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 sales (if using three-factor method, 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 apportionable 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 apportionable 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 nonapportionable 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 apportionable 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 nonapportionable 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 a single-weighted sales factor for all taxpayers.

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 nonapportionable 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 taxpayer’s market for the sales is in this state (See Idaho Code section 63-3027(13)).

Although the following amounts might be apportionable 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

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.

Form	Description
FORM 14	Water's Edge Election and Consent
FORM DDS‑1	Idaho Domestic Disclosure Spreadsheet - Affiliated Corporations
FORM DDS‑2 (page 1)	Idaho Domestic Disclosure Spreadsheet - Nonbusiness Income/Loss
FORM DDS‑2 (page 2)	Idaho Domestic Disclosure Spreadsheet - Nonbusiness Income/Loss
FORM DDS‑2A	Idaho Domestic Disclosure Spreadsheet - State Filing Requirements
FORM DDS‑2B	Idaho Domestic Disclosure Spreadsheet - Combined Filing Group
FORM DDS‑2C	Idaho Domestic Disclosure Spreadsheet - Apportionment Percentage
FORM DDS‑2D	Idaho Domestic Disclosure Spreadsheet - Nonbusiness Income/Loss
FORM DDS‑2E	Idaho Domestic Disclosure Spreadsheet - Destination Sales
Instructions for Domestic Disclosure Spreadsheets

Laws and rules

Water’s Edge Election — Idaho Code section 63-3027B; , Income Tax Rule 640, 641, 642, 643, 644, 645 and 646
Treatment of Dividends — Idaho Code section 63-3027C, Income Tax Rule 645
Presumptions and Burdens of Proof — Idaho Code section 63-3027D, Income Tax Rule 642
Operative Dates — Idaho Code section 63-3027E
Domestic Disclosure Spreadsheet — Income Tax Rule 646

Apportionable Income vs. Nonapportionable Income

The United States Constitution requires a relationship between an activity and a state before the state can tax the activity. If the taxable activity is part of a unitary business, the combined income of the unitary business is subject to apportionment.

Apportionable income is sourced to the various states/countries where a business is conducted compared to nonapportionable income, which is specifically allocated to a state or country. Therefore, it’s important to understand the difference between the two.

Apportionable income can be any type or class of income and can result from any activity that meets either the “transactional test” or the “functional test”. For example, apportionable income can include interest, dividends, and gains on investments of working capital, as well as investment income on sinking funds, and income from other investments needed to satisfy creditors or future needs of the business.

The “transactional test” provides that if income arises from a transaction or activity in the regular course of your business, the income is apportionable income. For example, interest and gains derived from investments of working capital are transactions in the regular course of business.

The “functional test” provides that if you acquire, manage, or dispose of property and this activity is an “integral part” of your regular trade or business operations, the income from the activity is apportionable income. For example, a manufacturing company acquires, uses, and disposes of tangible as well as intangible assets as part of its regular operations. Although the sale of a manufacturing facility may occur infrequently, this type of transaction does occur during the normal course of operating a manufacturing business.

Nonapportionable income is all income other than apportionable income. It’s allocated to the specific state where it was earned. If the income is from intangible assets, it’s typically allocated to the state of the corporation’s commercial domicile or the principal place from which the trade or business is directed or managed. Nonapportionable income is also referred to as allocable income and must be offset by the deductions relating to its production.

Filing Combined Reporting Returns

Combined reporting contrasted with consolidated returns

For federal purposes, a unitary group may be filing a federal consolidated return. Idaho law doesn’t provide for the filing of a consolidated return. Instead, a unitary group must use the combined reporting method. The combined report is often confused with a consolidated return, but they aren’t the same.

The combined reporting method doesn’t refer to whether the unitary group files one or more returns. If you file a single return for the group, this is called a group return, and discussed in the next section.

Some differences between a combined report and a federal consolidated return include the following:

	Idaho Combined Report	Federal Consolidated Return
Computation of tax liability	Each corporation required to file in Idaho computes its own Idaho tax liability, net operating loss, and credits	The affiliated group computes a single income tax liability for the group
Who can be included	Unitary group – Parent-subsidiary and brother-sister corporation groups	Affiliated group – Only parent-subsidiary groups
Common ownership requirement	More than 50%	80% or more

Group return

For convenience, Idaho allows a unitary group to file one Idaho “group return” for the entire unitary group. Group returns don’t ignore the corporate identities of the individual corporations. Each corporation is considered a taxpayer even though it’s part of a unitary group and regardless of whether a group return is filed or each corporation files its own Idaho income tax return.

Idaho returns must include copies of the federal returns and spreadsheets detailing the information identified in the following table:

Item	If Filing a Group Return	If Filing Separate Returns for Each Idaho Filer
Federal taxable income detail Intercompany eliminations State adjustments to federal taxable income Income/loss allocated outside Idaho	Forms 41 and 42 Include total amounts for the combined group – provide by-company spreadsheets for each corporation in the unitary group	Same as if filing a group return
Income/loss allocated to Idaho Idaho taxable income Idaho income tax Idaho net operating loss deduction Idaho credits earned/allowed Permanent Building Fund tax Total tax due	Form 41 includes total amounts for all Idaho filers – provide spreadsheets for each Idaho filer	Form 41 includes amounts only for filing corporation – provide spreadsheets for each filing corporation
Idaho apportionment factor	Form 42 includes total amounts for all Idaho filers – provide Form 42A By-Company Apportionment Factor Details listing all corporations listed as transacting in Idaho.	Form 42 includes amounts only for filing corporation – provide Form 42A By-Company Apportionment Factor Details listing all corporations listed as transacting in Idaho.