Instructions For Form 41 - Idaho State Tax Commission

GENERAL INFORMATION

A A A A A CCOUNTING METHODS

CCOUNTING METHODS

Nonbusiness Income.

CCOUNTING METHODS

Nonbusiness Income.

Nonbusiness Income. Nonbusiness income is all income other

You must use the same accounting method as that used for

than business income and must be allocated, not apportioned.

federal tax purposes. A change of accounting method must

Allocation is the assignment of nonbusiness income to a spe-

have prior approval from the Internal Revenue Service. Attach a

cific state.

copy of the federal approval on Form 3115, Application for

Change in Accounting Method, to your return.

Apportionment Formula.

Apportionment Formula. The apportionment formula consists

of three factors: property, payroll, and sales. These percent-

AMENDED RETURNS

ages are averaged to arrive at the Idaho apportionment factor.

If you discover an error on your return after it is filed, do not file

For most taxpayers, the sales factor is double weighted.

the same form again. Use a Form 41X, Amended Business In-

come Tax Return, to make the necessary corrections. If you

Electrical and telephone utilities must use a single-weighted sales

amend your federal return, an amended Idaho income tax return

factor. See the instructions for Schedule 42.

must be filed. The statute of limitations for receiving a refund is

three years from the due date of the return or the date the return

EXCEPTIONS TO APPORTIONMENT FORMULA

was filed, whichever is later.

If the allocation and apportionment provisions do not fairly rep-

resent your business activity in Idaho, one of the following ex-

FEDERAL

FEDERAL A A A A A UDIT

UDIT

ceptions may be used:

If your federal taxable income or tax credits change because of

a federal audit, you must send written notice to the Tax Com-

Separate Accounting.

Separate Accounting. Separate accounting means allocating

mission within 60 days of the final federal determination. You

income and related expenses to the state where the activity

must include copies of all schedules supplied by the Internal

occurred. Separate accounting may be used only with prior

Revenue Service. If you owe additional Idaho tax and do not

approval from the Tax Commission. You must submit a written

send written notice within 60 days, a 5% negligence penalty

request at least 30 days prior to the due date for filing the re-

will be imposed. Interest applies on any tax due. If the final

turn, not including extensions. Mail your request to: Income

federal determination results in an Idaho refund and the statute

Tax Policy, Idaho State Tax Commission, PO Box 36, Boise, ID

of limitations is closed, you have one year from the date of the

83722-0036.

final determination to file for the refund.

Exclusion Of A Factor.

Exclusion Of A Factor. If any of the factors (property, payroll,

NET OPERATING LOSSES

or sales) do not apply to your business, use the remaining fac-

A corporation incurs an Idaho net operating loss in a year when

tors to compute the Idaho apportionment factor. To determine

it is transacting business in Idaho and its Idaho taxable income

the average percentage, divide only by the number of factors

is less than zero. A net operating loss incurred by a corporation

used.

during a tax year in which it was not transacting business in

Idaho may not be subtracted.

Tax On Gross Sales/Alternative Tax.

Tax On Gross Sales/Alternative Tax. A corporation that neither

Tax On Gross Sales/Alternative Tax.

owns nor rents Idaho property nor incurs Idaho payroll may elect

The net operating loss generally must be carried back to the

to pay tax to Idaho at the rate of 1% of gross sales if its Idaho

three preceding years. The carryback is limited to a maximum

sales are $100,000 or less.

of $100,000. Any remaining loss may be carried forward until

used, but no longer than 15 years.

MODIFIED FACTORS FOR CERTAIN INDUSTRIES

The following businesses must use special rules in computing

A corporation can elect to forego the carryback provisions and

the apportionment factors:

carry the loss forward up to 15 years. This election must be

•

made before the due date, including extensions, of the loss year

Airlines

•

return. To make the election, check the box on line 36 of Form

Carriers of Freight or Passengers

41, indicating the election to forego the carryback period.

•

Construction Contractors

•

Television and Radio Broadcasters

•

An S corporation is not allowed a deduction for a net operating

Publishers

loss carryback or carryforward. The loss must be passed

•

Financial Institutions

through to the shareholder to be taken on his individual income

tax return.

See the instructions for Schedule 42.

UNITARY BUSINESS

GENERAL INFORMATION FOR

A multistate business is unitary when the operations conducted

MULTISTATE/MULTINATIONAL TAXPAYERS

in Idaho are integrated with, depend on, or contribute to, the

business outside Idaho. Some of the tests used to determine if

AND UNITARY GROUPS

a business is unitary include the following:

•

The three unities test. The three elements of a unitary busi-

The following instructions apply only to corporations that are

ness include:

taxable in Idaho and another state or country (multistate/multi-

national corporations) or are part of a unitary group of corpora-

1 . unity of ownership;

tions.

2 . unity of operation as evidenced by central divisions for

functions such as purchasing, advertising, accounting and

ALLOCATION AND APPORTIONMENT OF INCOME

management; and

Business Income.

Business Income. Business income includes income from trans-

3 . unity of use in its centralized executive force and central-

actions or activity in the regular course of your trade or busi-

ized system of operations.

ness. Business income also includes income from tangible or

intangible property if the acquisition, management, or disposi-

•

The contribution or dependency test. The operation of the

tion of the property is an integral part of your regular trade or

portion of the business done in the state depends on or con-

business operations. Business income may result even though

tributes to the operation of the overall business.

the income was derived from an occasional or extraordinary

transaction. All business income must be apportioned using the

apportionment formula.

Instructions For Form 41 - Idaho State Tax Commission - 1998 Page 3

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