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SCHEDULE 42

Option 1

Option 1 Enter the net income before income taxes stated on

nonunitary subsidiaries is a subtraction on line 9. Attach a sched-

each affiliate's profit and loss statement prepared for the United

ule identifying the intercompany transactions by corporation.

States Securities and Exchange Commission (SEC). If the profit

and loss statement is not filed with the SEC, enter the net in-

Line 7 O

Line 7 OTHER

THER

THER ADDITIONS

ADDITIONS

come or loss before income taxes reported on the profit and

Enter any miscellaneous Idaho additions. Attach a schedule iden-

loss statement prepared for reporting to shareholders that is

tifying each miscellaneous addition by corporation.

subject to review by an independent auditor.

SUBTRACTIONS

Option 2

Option 2 The net income or loss reported on the profit and loss

statements may be adjusted to tax accounting standards as

Line 9

Line 9 FEDERAL TAXABLE INCOME OF NONUNITARY SUB-

FEDERAL TAXABLE INCOME OF NONUNITARY SUB-

Line 9

FEDERAL TAXABLE INCOME OF NONUNITARY SUB-

would be required by the Internal Revenue Code if the corpora-

SIDIARIES INCLUDED ON THE FEDERAL RETURN

tion were incorporated in the United States. If a corporation

Enter the federal taxable income of nonunitary subsidiaries in-

chooses to make the book to tax adjustments, all book to tax

cluded in the federal consolidated return. Attach a schedule

adjustments must be made for all unitary foreign corporations

identifying the income or loss by corporation.

not included in the consolidated federal return. The book to tax

adjustments must be consistently applied each year the group

Line 10 DIVIDEND EXCLUSION

files a worldwide return.

The following dividend exclusions are applicable only to water’s

edge filers.

Attach a schedule detailing the book to tax adjustments by com-

pany.

a. Foreign Dividends. Enter the total amount of dividends paid

by foreign affiliates. Include the amounts of income from

Line 2 FEDERAL TAXABLE INCOME OF NONCONSOLIDATED

controlled foreign corporations under subpart F if included in

UNITARY SUBSIDIARIES

federal taxable income. Enter the portion of FSC dividends

UNITARY SUBSIDIARIES

Enter the federal taxable income of unitary subsidiaries incorpo-

that are not included on line 11.

rated in the United States that are more than 50% commonly

b. Deemed Dividends From Possession Corporations. Enter the

owned and that were not included in the federal consolidated

amount from line 5, Part II. Do not include any actual divi-

return. This is the amount reported on the subsidiary’s federal

dends paid by possession corporations on this line.

income tax return, Form 1120, adjusted for the Idaho additions

d. Exclusion Percentage. If you elected to forego filing the

and subtractions listed on Form 41. Attach a schedule identify-

water’s edge spreadsheets as indicated on line 10b, Form

ing this income by company.

41, enter 80%. Enter 85% if you attached the water’s edge

spreadsheets.

Line 3 FOREIGN SALES CORPORATIONS

Water’s Edge Filers. Enter the federal taxable income of a For-

Line 11 INTERCOMPANY DIVIDENDS INCLUDED ON THE COM-

eign Sales Corporation (FSC) from federal Form 1120-FSC. This

BINED RETURN

is the federal amount computed after applying Internal Revenue

Water’s Edge Filers. Enter the total of the following amounts:

Code, Section 921, Exempt Foreign Trade Income Excluded From

•

Gross Income.

the dividend income, included in federal taxable income, re-

ceived by a member of the water’s edge combined group from

Worldwide Filers. Enter the income of FSCs computed using

another member of the water’s edge combined group;

•

Option 1 or Option 2 listed under the instructions for line 1. Do

the dividend income, included in federal taxable income, re-

not include income previously reported on line 1.

ceived by a member of the water’s edge combined group from

a possession corporation; and

•

Line 4 INCOME OF FOREIGN CORPORATIONS SUBJECT TO

the intercompany dividends paid by a FSC to another member

FEDERAL TAXATION

of the water’s edge combined group. The amount of divi-

Water’s Edge Filers. Enter the federal taxable income reported

dends determined to be intercompany is the same proportion

by corporations incorporated outside the United States that are

of the dividend paid as the proportion that FSC federal taxable

required to file a federal income tax return. This includes for-

income for the year out of which the dividend was paid bears

eign corporations filing a federal Form 1120F.

to the total FSC income before taxes for that year.

Worldwide Filers. Enter the income of foreign corporations sub-

Worldwide Filers. Enter the amount of any dividends paid by a

ject to federal taxation computed using Option 1 or Option 2

member of the unitary group to another member of the unitary

listed under the instructions for line 1. Do not include income

group that have not been subtracted elsewhere on this schedule

previously reported on line 1.

or Form 41.

Line 5 IRC SECTION 936 POSSESSION CORPORA

Line 5 IRC SECTION 936 POSSESSION CORPORATIONS

TIONS

Attach a schedule identifying payors, payees and dividend

Line 5 IRC SECTION 936 POSSESSION CORPORA

TIONS

Enter the federal taxable income of corporations filing under In-

amounts regardless of the filing method.

ternal Revenue Code Section 936, Puerto Rico And Possession

Tax Credit. For water’s edge filers, this amount is considered a

Line 12 INTERCOMPANY TRANSACTIONS INCLUDED ON THE

deemed dividend subject to an 85% exclusion that will be com-

FEDERAL RETURN

puted under “Subtractions."

Enter the intercompany transactions, between members of the

combined group, that have not otherwise been eliminated.

Line 6 INTERCOMPANY ELIMINATIONS

Enter the amount of intercompany transactions between mem-

Line 13 OTHER SUBTRACTIONS

bers of the combined group and nonunitary subsidiaries elimi-

Enter any miscellaneous Idaho deductions. Attach a schedule

nated on the federal consolidated return. The income of the

identifying each miscellaneous deduction by corporation.

These instructions do not provide a comprehensive

explanation of Idaho tax laws or rules.

Costs associated with this publication are available from the

Idaho State Tax Commission

in accordance with Section 60-202, Idaho Code.

1 6

Instructions For Schedule 42 - Supplemental Schedule For Multistate/multinational Business - Idaho State Tax Commission Page 4

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