The core principle being tested is the Idaho Tax Commission’s authority to issue jeopardy assessments. Idaho Code § 63-3067 grants the Tax Commission the power to make jeopardy assessments when it finds that the assessment or collection of a deficiency of income tax will be jeopardized by delay. This power allows the commission to immediately assess and demand payment of taxes, interest, and penalties when there is a risk that the taxpayer might dissipate assets or leave the jurisdiction, thus making future collection impossible. The assessment is based on any available information, and the taxpayer has the right to request a review or protest the assessment. The commission’s determination of jeopardy is a prerequisite for issuing such an assessment. The question revolves around the specific trigger for this authority.

In Idaho, the determination of whether a business activity constitutes a unitary business for consolidated tax return purposes is crucial. Idaho Code § 63-3027 outlines the principles for unitary business attribution. A unitary business is defined as a business enterprise that is conducted by two or more related entities, or by a single entity, where the business operations of such entities are integrated with, dependent upon, or contribute to the operations of the enterprise as a whole. The Idaho State Tax Commission employs several tests to ascertain unity, including the functional test, organizational test, and commonality of enterprise test. The functional test examines the degree of operational interdependence, such as shared services, shared facilities, or integrated management. The organizational test looks at the ownership structure and control between related entities. The commonality of enterprise test considers whether the businesses are part of a larger, single economic enterprise. For a business to be considered unitary in Idaho, there must be a significant flow of value or a substantial economic interrelationship between the parts of the business. This interrelationship is key to preventing the artificial separation of income-generating activities across different jurisdictions or entities to minimize tax liability. When a business is deemed unitary, its total income, regardless of where it is earned, is apportioned to Idaho based on a prescribed formula, typically involving sales, property, and payroll factors. This contrasts with non-unitary businesses, where each entity or business line is taxed separately on its Idaho-sourced income. The Idaho Supreme Court has consistently emphasized that the “flow of value” is a paramount consideration in establishing unity, meaning that the various parts of the business must contribute to or benefit from the overall enterprise.

The Idaho Tax Commission, under Idaho Code Title 63, governs various aspects of state taxation. For the purpose of sales and use tax, the concept of “gross receipts” is fundamental. Idaho Code Section 63-3601(5) defines gross receipts as the total amount of consideration, whether received in cash or by other means, for all sales of tangible personal property and services within Idaho, valued in money, whether received or accrued. This definition explicitly excludes certain items, such as cash discounts actually allowed and taken, and the amount of any tax imposed by the United States, any state, or any political subdivision thereof, if the amount of such tax is separately stated from the amount of the sale price or charge for the sale, furnishing, or service, and has been paid to the taxing authority. In the context of a retail sale of a product in Idaho, if the seller offers a discount to a customer for prompt payment, and this discount is applied to the sales price before the tax is calculated, the sales tax is then levied on the discounted price. For instance, if a product is sold for $100, and a 5% discount for prompt payment is applied, the taxable sale price becomes $95. The Idaho sales tax rate is 6%. Therefore, the sales tax would be calculated on $95. Calculation: Taxable Sale Price = Original Sale Price – Discount Taxable Sale Price = $100 – ($100 * 0.05) = $100 – $5 = $95 Sales Tax = Taxable Sale Price * Idaho Sales Tax Rate Sales Tax = $95 * 0.06 = $5.70 This scenario highlights the importance of understanding what constitutes “gross receipts” for sales tax purposes in Idaho, specifically how discounts affect the taxable base. The exclusion of separately stated and remitted taxes is also a key component of the definition, ensuring that the tax itself is not taxed. The principle is that sales tax is levied on the value of the goods or services transferred, and discounts reduce that value before the tax is applied.

Idaho Code Section 63-3022(11) outlines the criteria for the Idaho income tax credit for certain business expenses related to the acquisition of pollution control facilities. The credit is designed to incentivize businesses to invest in equipment that reduces or prevents pollution, thereby benefiting the environment and public health within Idaho. The credit is generally calculated as a percentage of the cost of qualifying pollution control property placed in service during the tax year. However, the statute also includes provisions that limit the total credit a taxpayer can claim in any given year, as well as carryforward and carryback provisions for unused credit amounts. Specifically, the credit is nonrefundable, meaning it can reduce the taxpayer’s Idaho income tax liability to zero, but any excess credit cannot be claimed as a refund. The amount of the credit is subject to an annual limitation, and any portion of the credit that exceeds the limitation for the current year can be carried forward to future tax years. The carryforward period is typically five years. The purpose of this limitation and carryforward mechanism is to ensure that the credit’s benefit is realized over time without unduly impacting state revenue in a single tax year, while still providing a meaningful incentive for long-term environmental investments. The calculation involves determining the eligible cost basis of the pollution control property and applying the statutory credit percentage, then comparing this to the taxpayer’s Idaho tax liability and any applicable annual credit limitations.

In Idaho, the concept of nexus, which establishes a sufficient connection for a business to be subject to the state’s taxing authority, is primarily determined by Idaho Code § 63-3009. This statute outlines the physical presence rule and also addresses economic nexus. For income tax purposes, a business generally establishes nexus if it has a physical presence in Idaho, such as owning or leasing property, employing individuals, or conducting regular business activities within the state. However, Idaho has also adopted economic nexus standards, meaning a business can be subject to Idaho income tax if its economic activity within the state exceeds certain thresholds, even without a physical presence. These thresholds are typically based on gross receipts or the number of transactions within a tax year. The Idaho State Tax Commission is responsible for interpreting and enforcing these nexus rules. For a business operating solely through an independent contractor in Idaho, the determination of nexus hinges on the nature and extent of the contractor’s activities and the degree of control the business exercises over those activities. If the independent contractor’s activities are minimal and do not constitute regular business operations or create a significant economic impact, nexus may not be established. Conversely, if the contractor’s activities are substantial and integral to the business’s operations in Idaho, nexus could be deemed to exist.

Idaho Code Section 63-3022(11) outlines the treatment of capital gains and losses for Idaho income tax purposes. Generally, Idaho conforms to federal law regarding the definition and treatment of capital assets and the netting of capital gains and losses. However, Idaho allows for an adjustment to taxable income for net capital gains. Specifically, for tax years beginning on or after January 1, 2017, Idaho allows a deduction for 60% of net capital gain. This means that if an individual has a net capital gain, they can deduct 60% of that amount from their Idaho taxable income. For example, if a taxpayer in Idaho realizes a net capital gain of $10,000, they would be allowed to deduct $6,000 ($10,000 * 0.60) from their Idaho taxable income, effectively reducing their Idaho tax liability on that gain. This provision aims to provide tax relief on long-term investment gains. It is crucial to distinguish this from the treatment of ordinary income or other types of deductions. The 60% deduction applies only to the net amount of capital gains after offsetting capital losses.

In Idaho, the concept of nexus for corporate income tax purposes is crucial for determining if an out-of-state business must file and pay taxes in the state. Idaho follows the established legal precedent regarding business activity that creates a taxable presence. This includes physical presence, such as maintaining an office, warehouse, or employees within Idaho, as well as economic nexus, which is triggered by substantial economic activity within the state, even without a physical presence. Idaho Code § 63-3024 outlines the apportionment of business income for corporations operating both inside and outside Idaho. For a business to be considered taxable in Idaho, it must have a sufficient connection, or nexus, with the state. This connection is established if the business is organized under Idaho laws, has a commercial domicile in Idaho, or has obtained a certificate of incorporation or authority to transact business in Idaho. Furthermore, the state’s tax laws, influenced by federal precedent like the Commerce Clause of the U.S. Constitution, consider whether the business’s activities within Idaho are sufficiently substantial to justify the imposition of a tax. The Multistate Tax Compact, to which Idaho is a party, also provides guidance on nexus and apportionment. A key aspect is the distinction between “solicitation of orders” and “substantial business activity.” Generally, merely soliciting orders that are sent outside the state for approval and filled by shipment from outside the state does not create nexus. However, if an employee’s activities go beyond mere solicitation, such as negotiating contracts or providing substantial services within Idaho, nexus can be established. For a business to be subject to Idaho corporate income tax, it must engage in activities that create a demonstrable link to the state’s economy and tax base.

In Idaho, a taxpayer’s ability to claim a credit for taxes paid to another state hinges on the principle of reciprocity or tax nexus. Idaho Code Section 63-3029 governs the credit for income tax paid to other states. For a credit to be allowed, the income must be taxable by both Idaho and the other state, and the taxpayer must have been a resident of Idaho when the income was earned. Idaho generally allows a credit for income tax paid to another state if that state either imposes a tax on income earned by Idaho residents or if there is a reciprocal agreement in place. However, the credit is limited to the lesser of the tax paid to the other state or the Idaho tax liability on that same income. If the other state’s tax rate on the income is lower than Idaho’s, the credit is capped at the Idaho tax amount attributable to that income. Conversely, if the other state’s tax rate is higher, the credit is limited to the amount actually paid to the other state. The core principle is to prevent double taxation on the same income earned by an Idaho resident.

In Idaho, the concept of apportionment is crucial for determining how a business’s income is taxed when it operates both within and outside the state. The Idaho State Tax Commission utilizes a three-factor apportionment formula for most businesses, which includes sales, property, and payroll. Specifically, Idaho Code § 63-3027 outlines the method for allocating and apportioning income. The formula is calculated as: (Sales Factor + Property Factor + Payroll Factor) / 3. Each factor is a ratio of the business’s in-state activity to its total activity. The sales factor is the ratio of gross receipts from sales within Idaho to total gross receipts everywhere. The property factor is the average value of the taxpayer’s real and tangible property in Idaho divided by the average value of all real and tangible property everywhere. The payroll factor is the total compensation paid to employees in Idaho divided by the total compensation paid to employees everywhere. For a business with significant in-state sales, property, and payroll, the apportionment calculation would involve summing these three ratios and dividing by three. For instance, if a company has a sales factor of 0.70, a property factor of 0.50, and a payroll factor of 0.40, its total apportionment percentage would be \((0.70 + 0.50 + 0.40) / 3 = 1.60 / 3 = 0.5333\). This means 53.33% of the company’s net income would be subject to Idaho income tax. The apportionment formula ensures that a fair share of income is taxed in Idaho based on the business’s economic presence within the state, aligning with the principle of benefit received from state services.

Idaho Code § 63-3022(1)(a) defines net income for corporate income tax purposes as federal taxable income with certain modifications. One such modification is the addition of state income taxes deducted in arriving at federal taxable income, as per Idaho Code § 63-3022(1)(a)(i). When a corporation files a consolidated federal return but a separate Idaho return, or vice versa, specific apportionment rules apply. Idaho utilizes the Uniform Division of Income for Tax Purposes Act (UDITPA), codified in Idaho Code Title 32, Chapter 13, for the apportionment of income among states. For a business with operations in multiple states, including Idaho, the apportionment factor is typically a three-factor formula: property, payroll, and sales. However, the Idaho State Tax Commission can adjust or use an alternative method if the standard UDIPTA formula does not fairly represent the extent of the taxpayer’s business activity in Idaho. Idaho Code § 63-3022(1)(a)(i) mandates the add-back of state income taxes deducted federally. Therefore, if a corporation deducts its Idaho state income tax expense on its federal return, it must add this amount back to its federal taxable income when calculating its Idaho net income. This ensures that the state income tax expense is not deducted twice. The scenario presented involves a corporation operating in Idaho and Oregon. The corporation’s federal taxable income includes a deduction for state income taxes paid to both Idaho and Oregon. For Idaho tax purposes, the deduction for Idaho state income taxes must be added back. The deduction for Oregon state income taxes, however, remains a valid deduction for Idaho apportionment purposes, as it is a tax imposed by another state on business activity conducted in that state, and Idaho’s apportionment rules aim to allocate income based on business activity within Idaho. The question focuses on the modification required for Idaho’s net income calculation, specifically the add-back of state income taxes.

Idaho Code Section 63-3022(1) outlines the treatment of net operating losses (NOLs) for corporate income tax purposes. For tax years beginning after December 31, 2016, Idaho has moved to a carryforward-only system for NOLs. This means that a net operating loss incurred in a tax year can only be used to offset taxable income in future tax years. It cannot be carried back to offset income from prior tax years. The carryforward period for these losses is generally 20 years. Therefore, if a corporation incurs a net operating loss in a specific tax year, that loss can be carried forward indefinitely until it is fully utilized against future taxable income, provided the carryforward period is not exceeded. The specific Idaho tax law allows for the carryforward of net operating losses.

Idaho Code Section 63-3022(1) outlines the treatment of net operating losses (NOLs) for corporate income tax purposes. Generally, a net operating loss sustained in a taxable year may be carried forward to offset taxable income in subsequent years. For Idaho corporate income tax, the carryforward period is typically limited to twenty years. However, there are specific provisions regarding the calculation and application of these losses. The Idaho Tax Commission provides guidance on the allowable methods for NOL calculations and limitations. It is crucial to understand that the Idaho NOL deduction cannot reduce Idaho taxable income below zero for any given year. Furthermore, any NOL that remains unused after the twenty-year carryforward period is permanently lost. The question revolves around the maximum duration an Idaho net operating loss can be utilized to reduce taxable income in future years, according to Idaho tax law. The statutory limit for carrying forward a net operating loss in Idaho is twenty years.

Idaho Code § 63-3022(1) outlines the state’s approach to taxing capital gains. For Idaho residents, capital gains are generally treated as ordinary income and are subject to the state’s graduated income tax rates. However, Idaho offers a specific deduction for capital gains realized from the sale of qualified assets. Idaho Code § 63-3022(1)(a) specifies that taxpayers can deduct 60% of the net capital gain from the sale of capital assets held for more than one year. This deduction is applied to the taxpayer’s federal adjusted gross income (AGI) to arrive at Idaho taxable income. Therefore, if a taxpayer has a net capital gain of \$10,000 from an asset held for more than one year, the deductible amount would be 60% of \$10,000, which equals \$6,000. This \$6,000 is then subtracted from their federal AGI to determine their Idaho AGI. The remaining \$4,000 of capital gain is then subject to Idaho’s ordinary income tax rates. This provision aims to encourage long-term investment within Idaho by providing tax relief on appreciated assets held for an extended period. The key is the holding period of the asset and the classification of the gain as a “net capital gain” after accounting for capital losses.

In Idaho, the determination of whether a business activity constitutes a unitary business for state income tax purposes is crucial for consolidated filing and apportionment. Idaho follows the Multistate Tax Commission (MTC) definition and factors for unitary business. A business is considered unitary if there is a substantial or significant degree of operational integration, centralization of management, or economies of scale among the business activities. The three common tests used to establish a unitary business are the “three-unity” test, which includes: 1) Unity of Ownership, meaning one entity owns or controls more than 50% of the voting stock of another; 2) Unity of Operation, demonstrated by functional integration, centralized services, or substantial intercompany transactions; and 3) Unity of Management, shown by common officers, directors, or key personnel making strategic decisions for multiple entities. For Idaho purposes, the presence of two or three of these unities is generally sufficient to establish a unitary business. The question asks about the minimum requirement to establish a unitary business in Idaho. While all three unities can contribute to a finding of a unitary business, the Idaho Tax Commission, aligning with MTC guidelines, often finds a unitary business when there is significant operational integration and either unity of ownership or unity of management, or when two of the three unities are present. However, the most direct and commonly cited threshold, particularly when operational integration is present, is the presence of at least two of the three unities. The question probes the minimum threshold. While a single strong indicator like substantial intercompany transactions might suggest unity of operation, the established tests generally rely on a combination. Therefore, the presence of two out of the three unities is the most robust indicator and the generally accepted minimum for establishing a unitary business in Idaho.

Idaho Code Section 63-3022(1)(a) outlines the definition of a resident for income tax purposes. An individual is considered a resident of Idaho if they are present in the state with the intent to remain indefinitely. This is often referred to as domicile. Establishing domicile requires more than mere physical presence; it involves a subjective intent to make Idaho one’s permanent home. Factors considered in determining intent include the location of one’s permanent home, the place where one votes, the location of one’s family, the place where one’s business or professional activities are conducted, and the location of one’s bank accounts and personal property. The burden of proof is on the taxpayer to demonstrate that they have established a domicile outside of Idaho if they claim non-residency. Simply owning property or conducting business in Idaho does not automatically make an individual a resident if their intent is to maintain their domicile elsewhere. The concept of “presence with intent to remain indefinitely” is crucial for distinguishing between temporary visits and establishing a permanent home. Idaho law does not require a specific duration of physical presence to establish residency, but rather the intent to make Idaho one’s permanent abode.

In Idaho, the treatment of intangible property for estate tax purposes is governed by Idaho Code Title 14, Chapter 3. Specifically, Idaho Code § 14-310 addresses the taxation of intangible personal property. This section clarifies that intangible personal property is subject to Idaho estate tax if the decedent was a resident of Idaho at the time of death. Residency for tax purposes is generally established by domicile, which is the place where a person has their true, fixed, and permanent home and principal establishment, and to which, whenever they are absent, they have the intention of returning. If a decedent, regardless of where their physical assets are located, was domiciled in Idaho at the time of their passing, their entire estate, including intangible assets like stocks, bonds, and bank accounts held in other states, is subject to Idaho estate tax. Conversely, if the decedent was not a resident of Idaho, only intangible property with a situs within Idaho would be subject to Idaho estate tax, though the determination of situs for intangibles can be complex and often follows the domicile of the owner. Therefore, the key factor in determining the taxability of intangible property for Idaho estate tax purposes is the decedent’s domicile at the time of death.

Idaho Code § 63-3022(10) outlines the treatment of net operating losses (NOLs) for Idaho corporate income tax purposes. An Idaho net operating loss is defined as the excess, if any, of the deductions allowed by the Idaho Income Tax Act over the gross income, computed with certain modifications. These modifications include adding back deductions disallowed under Idaho law but allowed for federal purposes, and subtracting certain Idaho-specific income items. For tax years beginning on or after January 1, 2004, Idaho allows a net operating loss to be carried forward for a period of twenty years. The loss must be applied to the earliest taxable year for which it is available. No carryback of net operating losses is permitted. The amount of the NOL deduction in any given year is limited to 50% of the taxable income of the taxpayer for that year, computed without regard to the NOL deduction. This limitation applies to losses generated in tax years beginning after December 31, 2002. Therefore, if a corporation has an Idaho net operating loss of \$100,000 and its Idaho taxable income for the carryforward year is \$30,000, the NOL deduction for that year is limited to 50% of \$30,000, which is \$15,000. The remaining \$85,000 of the NOL can be carried forward to subsequent years, subject to the twenty-year limit and the annual 50% of taxable income limitation.

Idaho Code § 63-3022(1) establishes that the Idaho income tax is imposed on the net taxable income of every resident and non-resident individual, estate, and trust. Net taxable income is generally defined as gross income less allowable deductions. Idaho follows federal adjusted gross income (AGI) with certain modifications, as outlined in Idaho Code § 63-3022(2). These modifications include additions for certain state and local income taxes not deductible for federal purposes and subtractions for specific Idaho-related income, such as Idaho income tax refunds received and certain retirement income. For a taxpayer filing as married filing separately in Idaho, the ability to claim certain deductions, such as medical expenses or casualty losses, may be limited or require specific allocation if the spouses live together. If spouses live apart, Idaho law, similar to federal law, provides rules for allocating and apportioning deductions. Specifically, Idaho Code § 63-3022(10) addresses the treatment of deductions for spouses living apart, generally requiring that deductions attributable to the taxpayer be reported by the taxpayer and those attributable to the spouse be reported by the spouse. If a deduction is not attributable to one spouse, it must be allocated between the spouses. For itemized deductions where spouses live apart, the Idaho Tax Commission provides guidance that generally aligns with federal principles, often requiring that deductions be reported by the spouse to whom they are attributable. For example, if one spouse pays the mortgage interest on a property they exclusively occupy after separation, that spouse would generally claim the deduction. Medical expenses are typically tied to the individual incurring them or for whom they are paid. Without specific allocation rules for a shared expense or a deduction not clearly attributable to one spouse, an equitable apportionment is generally expected, but the primary principle is attribution to the spouse incurring or benefiting from the expense.

Idaho Code Section 63-3022(1) outlines the definition of a “resident” for income tax purposes. A person is considered a resident if they are present in Idaho with the intent to remain indefinitely. This is a factual determination based on several factors, often referred to as “domicile” factors. These factors include where a person maintains their permanent home, where their family resides, where they are registered to vote, where they hold a driver’s license or state identification, where they conduct business, and the location of their financial and professional affiliations. The Idaho State Tax Commission evaluates these factors holistically. If an individual maintains a domicile in Idaho and is physically present in the state, they are generally considered a resident for tax purposes, even if they also spend time in other states. The intent to remain indefinitely is crucial. If a person is merely present in Idaho for a temporary or transitory purpose, such as for a specific job assignment or a vacation, they would not be considered a resident unless their intent is to establish permanent residency. The concept of “domicile” is distinct from mere physical presence; it signifies the place where a person has established a fixed and permanent abode and to which, whenever absent, they have the intention of returning. Idaho law does not rely on a single factor but rather a totality of circumstances to determine residency.

Idaho Code Section 63-3022(10) outlines the treatment of net operating losses (NOLs) for corporate income tax purposes. Idaho generally conforms to the federal NOL provisions, but with specific state modifications. For tax years beginning after December 31, 2017, Idaho adopted a carryback and carryforward period for NOLs. An NOL incurred in a tax year may be carried back two years and carried forward twenty years. However, the amount of NOL that can be carried forward is limited to 80% of taxable income in the carryforward year. This limitation applies to both the carryback and carryforward periods. Therefore, if a corporation incurs an NOL in Idaho, it can utilize this loss against taxable income in prior years (carryback) or future years (carryforward), subject to the 80% limitation in the year the loss is applied. The question tests the understanding of this specific Idaho statutory provision regarding the percentage limitation on the utilization of net operating losses.

Idaho Code § 63-3022(1) outlines the general rule for taxing income of resident individuals, which includes all income from whatever source derived. For nonresidents, Idaho Code § 63-3022(11) states that only income derived from Idaho sources is taxable. Income derived from Idaho sources for nonresidents typically includes compensation for services performed within Idaho, gains from the sale of real property located in Idaho, and income from a business, trade, or profession conducted within Idaho. The concept of “doing business” in Idaho is crucial for determining source income. Idaho Tax Commission Rule 35.01.01.020 defines “doing business” broadly, encompassing the maintenance of an office, warehouse, or other place of business in Idaho, or the employment of individuals to perform services within the state. When a nonresident individual operates a business that has both in-state and out-of-state components, apportionment of the business income is necessary to determine the Idaho taxable portion. Idaho utilizes a single-sales factor apportionment formula for most business income, as per Idaho Code § 63-3022(14). This means that only the portion of business income attributable to sales within Idaho is considered Idaho-source income. The sales factor is calculated as the ratio of Idaho sales to total sales. Therefore, for a nonresident business owner whose business operations span multiple states, including Idaho, only the income generated from sales activities that occur within Idaho’s borders would be subject to Idaho income tax.

Idaho Code §63-3022(1) outlines the definition of a resident for income tax purposes. A person is considered a resident if they are domiciled in Idaho at any time during the tax year. Domicile is defined as a person’s permanent home, to which they intend to return whenever absent. Idaho also considers an individual a resident if they are physically present in Idaho for more than 183 days during the tax year, regardless of their domicile, unless they maintain a permanent place of abode elsewhere and do not spend more time in Idaho than any other state. In the scenario provided, Ms. Albright, a retired geologist, established her permanent home in Boise, Idaho, in 2022. She sold her previous residence in Montana and did not maintain any other permanent abode. Her intention was to remain in Idaho indefinitely, making Boise her domicile. Even if she were to travel extensively, her domicile in Idaho and her intention to return to her Boise home would classify her as an Idaho resident for tax purposes. Therefore, her income is subject to Idaho income tax.

In Idaho, the concept of nexus for sales and use tax purposes has evolved, particularly with the advent of remote sales. Prior to the South Dakota v. Wayfair, Inc. decision, nexus was primarily established through physical presence within the state. However, Wayfair significantly altered this landscape, allowing states to require out-of-state sellers to collect and remit sales tax based on economic activity, even without a physical presence. Idaho, like many states, has adopted economic nexus thresholds. For sales and use tax, Idaho law, specifically Idaho Code § 63-3620, outlines the requirements for registration and collection. An out-of-state seller is generally required to register and collect Idaho sales tax if their gross receipts from sales into Idaho exceed a certain economic threshold within a 12-month period. This threshold is currently set at \$100,000 in gross sales or 200 separate transactions into Idaho during the current or preceding calendar year. This economic nexus standard aims to level the playing field between in-state and out-of-state retailers and ensure that sales made into Idaho are subject to the state’s sales tax, regardless of where the seller is physically located. The determination of gross receipts is based on the total value of tangible personal property and taxable services sold into Idaho. The key principle is that substantial economic activity within the state creates a sufficient connection for tax collection obligations.

Idaho Code Section 63-3022(1)(a) defines “gross income” for corporate income tax purposes to include all income from whatever source derived, unless specifically excluded by statute. Idaho Code Section 63-3022(1)(b) outlines various deductions and exclusions. For a business operating in Idaho, income generated from intangible property, such as royalties from patents or trademarks, is generally considered Idaho source income if the intangible property is used in Idaho or if the income-producing activity occurs in Idaho. The apportionment of income for corporations operating both inside and outside Idaho is governed by Idaho Code Section 63-3027, which utilizes a three-factor apportionment formula (property, payroll, and sales) to determine the portion of a business’s total income attributable to Idaho. However, the question specifically asks about income derived from intangible property where the income-producing activity occurs outside Idaho, and the property itself is not physically located or used in Idaho. In such cases, Idaho law, consistent with general principles of state taxation of interstate commerce, generally does not assert jurisdiction to tax that income as Idaho source income. The key factor is the location of the income-producing activity. If the activity that generates the royalty income, such as the licensing negotiation and execution, occurs outside Idaho, and the intangible asset itself has no nexus with Idaho beyond the mere receipt of royalty payments, then that income is not considered Idaho source income. Therefore, the income would not be subject to Idaho corporate income tax.

In Idaho, the concept of “nexus” determines whether a business has sufficient connection to the state to be subject to its tax laws. For sales and use tax purposes, nexus can be established through physical presence or economic presence. Physical presence includes having an office, warehouse, or employees within Idaho. Economic nexus, as established by Idaho law and reinforced by court decisions, can be triggered by a certain level of sales or transaction volume into the state, even without a physical presence. Idaho Code § 63-3619 addresses sales and use tax collection obligations. Specifically, a retailer is required to collect and remit Idaho sales tax if they have a physical presence in Idaho or if they meet the economic nexus threshold. The current economic nexus threshold in Idaho is established by administrative rule based on a significant economic presence, generally defined by a certain dollar amount of gross sales or a specific number of separate transactions into the state within a calendar year. For a business that exclusively sells goods online and has no physical presence in Idaho, the trigger for sales tax collection obligation is meeting this economic nexus threshold, which is currently set at $100,000 in gross Idaho sales or 200 separate transactions into Idaho during the preceding calendar year. Therefore, a business that has no employees, no property, and no offices in Idaho, but generates $120,000 in gross sales to Idaho customers in the previous year, has established economic nexus. This means they are legally obligated to register, collect, and remit Idaho sales tax on their sales to Idaho customers. The other options represent scenarios that either do not meet the economic nexus threshold or describe a situation that is not the primary trigger for sales tax collection for an out-of-state online retailer without physical presence.

Idaho Code § 63-3022(1) addresses the deduction for medical expenses. This section allows taxpayers to deduct medical expenses that exceed a certain percentage of their adjusted gross income. For the tax year 2023, this threshold was 7.5% of federal adjusted gross income. Medical expenses are broadly defined to include payments for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for treatments affecting any structure or function of the body. This includes amounts paid for qualified long-term care services, health insurance premiums for the self-employed, and unreimbursed medical services. Crucially, the deduction is for *unreimbursed* medical expenses, meaning amounts not covered by insurance or other reimbursement sources. The taxpayer must itemize deductions to claim this medical expense deduction. If a taxpayer’s total qualified medical expenses exceed the AGI threshold, the excess amount is deductible. For example, if a taxpayer in Idaho has a federal AGI of $50,000 and $5,000 in unreimbursed medical expenses, the deductible amount would be calculated as follows: \( \$5,000 – (0.075 \times \$50,000) = \$5,000 – \$3,750 = \$1,250 \). This \$1,250 is the amount that can be included in itemized deductions on their Idaho income tax return, provided they meet other itemization requirements. The calculation of the threshold is based on federal AGI, which simplifies compliance for many taxpayers by aligning with federal tax law.

Idaho Code Section 63-3022(11) outlines the treatment of net operating losses (NOLs) for corporate income tax purposes. Generally, an Idaho net operating loss may be carried forward to offset taxable income in subsequent years. For losses arising in tax years beginning on or after January 1, 2003, the carryforward period is limited to twenty years. There is no provision for carrying back an Idaho net operating loss to prior tax years. The calculation of the allowable net operating loss deduction in a carryforward year is subject to certain limitations, including that the deduction cannot create or increase an Idaho net operating loss for the carryforward year. This means the deduction is limited to the amount of taxable income in that year. Understanding this carryforward mechanism is crucial for accurate corporate tax planning and compliance within Idaho.

Idaho Code Section 63-3022(1) outlines the provisions for net operating loss (NOL) deductions for corporations. For tax years beginning on or after January 1, 2009, Idaho generally conforms to federal NOL provisions, allowing a carryback of two years and a carryforward of twenty years. However, Idaho has specific modifications. A key distinction is that the amount of NOL that can be carried forward or back is limited to the amount of the NOL that is attributable to Idaho sources. For instance, if a corporation incurs a total NOL of \$100,000, but only \$60,000 of that loss is attributable to Idaho operations, then only \$60,000 can be carried back or forward in Idaho. Furthermore, Idaho does not allow an election to forgo the carryback period as permitted under federal law. The calculation of the Idaho-specific NOL must consider Idaho’s tax base and apportionment factors. If a corporation has both in-state and out-of-state operations, the NOL must be apportioned to Idaho using the state’s apportionment formula, which typically involves sales, property, and payroll factors. The Idaho Tax Commission provides guidance on how to calculate and report these apportioned losses.

In Idaho, the concept of nexus, or sufficient connection, is crucial for determining if a business is subject to state income tax. For a business to establish nexus, it must have a physical presence within the state. This physical presence can manifest in various ways, including having an office, warehouse, or other tangible property in Idaho, or employing individuals who conduct business activities within the state. Idaho Code § 63-3022 outlines the circumstances under which a business is considered to have a taxable presence. Specifically, it addresses apportionment of income for businesses operating both within and outside Idaho. The Idaho State Tax Commission provides further guidance, emphasizing that even minimal physical presence can trigger nexus. For instance, a business with an employee regularly performing services in Idaho, or a business owning or leasing tangible personal property in Idaho, would likely be considered to have established nexus. The presence of independent contractors, however, is a more nuanced area, and nexus may or may not be established depending on the level of control the business exercises over their activities. The key principle is that a sufficient economic or physical tie to the state must exist.

Idaho Code Section 63-3022(1) outlines the treatment of net operating losses (NOLs) for Idaho income tax purposes. For tax years beginning on or after January 1, 2017, Idaho generally conforms to the federal treatment of NOLs, allowing for a carryback of two years and a carryforward of twenty years. However, there are specific Idaho modifications. Idaho does not permit an indefinite carryforward as allowed under some federal provisions enacted after 2017. Furthermore, Idaho has specific rules regarding the calculation of the NOL deduction, which must be applied to the Idaho taxable income. The deduction for an NOL cannot reduce Idaho taxable income below zero. For instance, if a taxpayer has an Idaho taxable income of \$50,000 and an allowable NOL carryforward of \$70,000, the NOL deduction for that year would be limited to \$50,000, leaving \$20,000 of the NOL to be carried forward to future tax years. The Idaho Tax Commission may provide specific guidance or forms to report NOLs and their utilization. It is crucial for taxpayers to track their Idaho-specific NOLs and ensure compliance with Idaho’s conformity and modification rules.