H-87

H0087aaS............................................by REVENUE AND TAXATION
INCOME TAX - Amends existing law to increase the percentage of net capital
gain for taxable year 2001 from the sale or exchange of qualified property
which shall be a deduction in determining taxable income.

01/24    House intro - 1st rdg - to printing
01/25    Rpt prt - to Rev/Tax
03/29    Rpt out - rec d/p - to 2nd rdg
    Rls susp - PASSED - 55-6-9
      AYES -- Barraclough, Barrett, Bedke, Black, Bolz, Bradford, Bruneel,
      Callister, Collins, Cuddy, Deal, Denney, Ellis, Ellsworth, Eskridge,
      Field(13), Field(20), Gagner, Gould, Hadley, Hammond, Harwood,
      Hornbeck, Jaquet, Jones, Kellogg, Kendell, Kunz, Langford,
      Loertscher, McKague, Meyer, Mortensen, Moss, Moyle, Pearce, Pischner,
      Pomeroy, Raybould, Ridinger, Roberts, Sali, Schaefer, Sellman,
      Shepherd, Smith, Smylie, Stevenson, Stone, Tilman, Trail, Wheeler,
      Wood, Young(Young), Mr. Speaker
      NAYS -- Bieter, Boe, Chase, Henbest(Farley), Marley, Robison
      Absent and excused -- Bell, Campbell, Clark, Crow, Hansen, Higgins,
      Lake, Mader, Montgomery
    Floor Sponsor -- Moyle
    Title apvd - to Senate
03/29    Senate intro - 1st rdg - to Loc Gov
03/30    Rpt out - rec d/p - to 2nd rdg
    To 14th Ord
    Rpt out amen - to 1st rdg as amen
    Rls susp - PASSED as amen - 31-4-0
      AYES -- Andreason, Boatright, Branch, Brandt, Bunderson, Burtenshaw,
      Cameron, Danielson, Darrington, Davis, Deide, Frasure, Geddes,
      Goedde, Hawkins, Ingram, Ipsen, Keough, King-Barrutia, Lee, Lodge,
      Noh, Richardson, Risch, Sandy, Sims, Sorensen, Stennett, Thorne,
      Wheeler, Williams
      NAYS -- Dunklin, Schroeder, Stegner, Whitworth
      Absent and excused -- None
    Floor Sponsor -- Frasure
    Title apvd - to House
03/30    House concurred in Senate amens - to engros
    Rpt engros - 1st rdg - to 2nd rdg as amen
    Rls susp - PASSED as amen - 53-2-15
      AYES -- Barraclough, Barrett, Bedke, Bell, Black, Boe, Bolz,
      Bradford, Bruneel, Clark, Collins, Cuddy, Deal, Denney, Ellis,
      Eskridge, Field(13), Field(20), Gagner, Gould, Hadley, Harwood,
      Henbest(Farley), Hornbeck, Jaquet, Jones, Kellogg, Kendell, Kunz,
      Lake, Langford, Loertscher, Marley, McKague, Meyer, Montgomery,
      Mortensen, Moss, Moyle, Pischner, Pomeroy, Raybould, Ridinger,
      Roberts, Sali, Schaefer, Shepherd, Smylie, Stevenson, Tilman, Trail,
      Wood, Young(Young), Mr. Speaker
      NAYS -- Bieter, Robison
      Absent and excused -- Callister, Campbell, Chase, Crow, Ellis
      Ellsworth, Hammond, Hansen, Higgins, Mader, Pearce, Sellman, Smith,
      Stone Wheeler
    Floor Sponsor -- Gould
    Title apvd - to enrol
04/02    Rpt enrol - Sp signed - Pres signed
04/04    Governor signed
         Session Law Chapter 323
         Effective: 01/01/01

Bill Text

||||              LEGISLATURE OF THE STATE OF IDAHO             ||||
Fifty-sixth Legislature                  First Regular Session - 2001

                              IN THE HOUSE OF REPRESENTATIVES

                                     HOUSE BILL NO. 87

                             BY REVENUE AND TAXATION COMMITTEE

1                                        AN ACT
2    RELATING TO CAPITAL GAINS; AMENDING SECTION 63-3022H, IDAHO CODE, TO INCREASE
3        THE PERCENTAGE OF THE NET CAPITAL GAIN OVER A TWO TAXABLE YEAR PERIOD FROM
4        THE SALE OR EXCHANGE OF QUALIFIED PROPERTY WHICH SHALL BE A DEDUCTION IN
5        DETERMINING TAXABLE INCOME AND TO MAKE TECHNICAL CORRECTIONS; DECLARING AN
6        EMERGENCY AND PROVIDING RETROACTIVE APPLICATION.

7    Be It Enacted by the Legislature of the State of Idaho:

8        SECTION 1. That Section 63-3022H, Idaho Code, be, and the same is hereby
9    amended to read as follows:

10        63-3022H. DEDUCTION OF CAPITAL GAINS. (1) If an individual taxpayer
11    reports a net capital gain in determining taxable income, sixty eighty percent
12    (80%) in taxable year 2001 and one hundred percent (6100%) in taxable years
13    thereafter of the net capital gain from the sale or exchange of qualified
14    property shall be a deduction in determining taxable income.
15        (2) The deduction provided in this section is limited to the amount of
16    the net capital gain from all property included in federal taxable income. Net
17    capital gains treated as ordinary income by the iInternal rRevenue cCode do
18    not qualify for the deduction allowed in this section. The deduction otherwise
19    allowable under this section shall be reduced by the amount of any federal
20    capital gains deduction relating to such property, but not below zero.
21        (3) As used in this section "qualified property" means the following
22    property having an Idaho situs at the time of sale:
23        (a) Real property held at least eighteen (18) months;
24        (b) Tangible personal property used in Idaho for at least twelve (12)
25        months by a revenue-producing enterprise;
26        (c) Cattle or horses held for breeding, draft, dairy or sporting purposes
27        for at least twenty-four (24) months if more than one-half (1/2) of the
28        taxpayer's gross income (as defined in section 61(a) of the iInternal
29        rRevenue cCode) for the taxable year is from farming or ranching opera-
30        tions in Idaho;
31        (d) Breeding livestock other than cattle or horses held at least twelve
32        (12) months if more than one-half (1/2) of the taxpayer's gross income (as
33        defined in section 61(a) of the iInternal rRevenue cCode) for the taxable
34        year is from farming or ranching operations in Idaho;
35        (e) Timber grown in Idaho and held at least twenty-four (24) months;
36        (f) In determining the period for which property subject to this section
37        has been held by a taxpayer, the provisions of section 1223 of the
38        iInternal rRevenue cCode shall apply, except that when the holding period
39        includes any period during which the taxpayer held property other than the
40        property sold, all property held during the holding period must qualify
41        under this section.
42        (4) If an individual reports a capital gain from qualified property from
43    an S corporation or a partnership, a deduction shall be allowed under this

                                           2

1    section only to the extent the individual held his interest in the income of
2    the S corporation or the partnership for the time required by subsection (3)
3    of this section for the property sold.
4        (5) If an individual reports a capital gain from an estate, no deduction
5    shall be allowed under this section unless the holding period required in sub-
6    section (3) of this section was satisfied by the decedent, the estate, or the
7    beneficiary, or a combination thereof.
8        (6) If an individual reports a capital gain from a trust, no deduction
9    shall be allowed under this section unless the holding period required in sub-
10    section (3) of this section was satisfied by the grantor, the trust, or the
11    beneficiary, or a combination thereof.
12        (7) As used in this section "revenue-producing enterprise" means:
13        (a) The production, assembly, fabrication, manufacture, or processing of
14        any agricultural, mineral or manufactured product;
15        (b) The storage, warehousing, distribution, or sale at wholesale of any
16        products of agriculture, mining or manufacturing;
17        (c) The feeding of livestock at a feedlot;
18        (d) The operation of laboratories or other facilities for scientific,
19        agricultural, animal husbandry, or industrial research, development, or
20        testing.

21        SECTION 2. An emergency existing therefor, which emergency is hereby
22    declared to exist, this act shall be in full force and effect on and after its
23    passage and approval, and retroactively to January 1, 2001.

Amendment

||||              LEGISLATURE OF THE STATE OF IDAHO             ||||
Fifty-sixth Legislature                  First Regular Session - 2001

                                                     Moved by    Thorne

                                                     Seconded by Stegner

                                       IN THE SENATE
                              SENATE AMENDMENT TO H.B. NO. 87

1                               AMENDMENTS TO SECTION 1
2        On page 1 of the printed bill, in line 12, delete "one hundred" and
3    insert: "sixty"; and also in line 12, delete "6100" and insert: "60".

4                                 CORRECTION TO TITLE
5        On page 1, delete line 3, and insert: "THE PERCENTAGE OF THE NET CAPITAL
6    GAIN FOR TAXABLE YEAR 2001 FROM".

Engrossed Bill (Original Bill with Amendment(s) Incorporated)

||||              LEGISLATURE OF THE STATE OF IDAHO             ||||
Fifty-sixth Legislature                  First Regular Session - 2001

                              IN THE HOUSE OF REPRESENTATIVES

                        HOUSE BILL NO. 87, As Amended in the Senate

                             BY REVENUE AND TAXATION COMMITTEE

1                                        AN ACT
2    RELATING TO CAPITAL GAINS; AMENDING SECTION 63-3022H, IDAHO CODE, TO INCREASE
3        THE PERCENTAGE OF THE NET CAPITAL GAIN FOR TAXABLE YEAR 2001 FROM THE SALE
4        OR EXCHANGE OF QUALIFIED PROPERTY WHICH SHALL BE A DEDUCTION IN DETERMIN-
5        ING TAXABLE INCOME AND TO MAKE TECHNICAL CORRECTIONS; DECLARING AN EMER-
6        GENCY AND PROVIDING RETROACTIVE APPLICATION.

7    Be It Enacted by the Legislature of the State of Idaho:

8        SECTION 1. That Section 63-3022H, Idaho Code, be, and the same is hereby
9    amended to read as follows:

10        63-3022H. DEDUCTION OF CAPITAL GAINS. (1) If an individual taxpayer
11    reports a net capital gain in determining taxable income, sixty eighty percent
12    (80%) in taxable year 2001 and sixty percent (60%) in taxable years thereafter
13    of the net capital gain from the sale or exchange of qualified property shall
14    be a deduction in determining taxable income.
15        (2) The deduction provided in this section is limited to the amount of
16    the net capital gain from all property included in federal taxable income. Net
17    capital gains treated as ordinary income by the iInternal rRevenue cCode do
18    not qualify for the deduction allowed in this section. The deduction otherwise
19    allowable under this section shall be reduced by the amount of any federal
20    capital gains deduction relating to such property, but not below zero.
21        (3) As used in this section "qualified property" means the following
22    property having an Idaho situs at the time of sale:
23        (a) Real property held at least eighteen (18) months;
24        (b) Tangible personal property used in Idaho for at least twelve (12)
25        months by a revenue-producing enterprise;
26        (c) Cattle or horses held for breeding, draft, dairy or sporting purposes
27        for at least twenty-four (24) months if more than one-half (1/2) of the
28        taxpayer's gross income (as defined in section 61(a) of the iInternal
29        rRevenue cCode) for the taxable year is from farming or ranching opera-
30        tions in Idaho;
31        (d) Breeding livestock other than cattle or horses held at least twelve
32        (12) months if more than one-half (1/2) of the taxpayer's gross income (as
33        defined in section 61(a) of the iInternal rRevenue cCode) for the taxable
34        year is from farming or ranching operations in Idaho;
35        (e) Timber grown in Idaho and held at least twenty-four (24) months;
36        (f) In determining the period for which property subject to this section
37        has been held by a taxpayer, the provisions of section 1223 of the
38        iInternal rRevenue cCode shall apply, except that when the holding period
39        includes any period during which the taxpayer held property other than the
40        property sold, all property held during the holding period must qualify
41        under this section.
42        (4) If an individual reports a capital gain from qualified property from
43    an S corporation or a partnership, a deduction shall be allowed under this

                                           2

1    section only to the extent the individual held his interest in the income of
2    the S corporation or the partnership for the time required by subsection (3)
3    of this section for the property sold.
4        (5) If an individual reports a capital gain from an estate, no deduction
5    shall be allowed under this section unless the holding period required in sub-
6    section (3) of this section was satisfied by the decedent, the estate, or the
7    beneficiary, or a combination thereof.
8        (6) If an individual reports a capital gain from a trust, no deduction
9    shall be allowed under this section unless the holding period required in sub-
10    section (3) of this section was satisfied by the grantor, the trust, or the
11    beneficiary, or a combination thereof.
12        (7) As used in this section "revenue-producing enterprise" means:
13        (a) The production, assembly, fabrication, manufacture, or processing of
14        any agricultural, mineral or manufactured product;
15        (b) The storage, warehousing, distribution, or sale at wholesale of any
16        products of agriculture, mining or manufacturing;
17        (c) The feeding of livestock at a feedlot;
18        (d) The operation of laboratories or other facilities for scientific,
19        agricultural, animal husbandry, or industrial research, development, or
20        testing.

21        SECTION 2. An emergency existing therefor, which emergency is hereby
22    declared to exist, this act shall be in full force and effect on and after its
23    passage and approval, and retroactively to January 1, 2001.

Statement of Purpose / Fiscal Impact

                      STATEMENT OF PURPOSE

                            RS10738

          AMENDMENTS TO THE REVENUE AND TAXATION STATUTE

      In 1987 the Idaho Legislature passed legislation to restore
    favorable capital gains treatment on certain assets for tax
    purposes.

      The purpose of this legislation is to increase the exclusion
    from 60% to 100% over two years effectively eliminating
    state assessed capital gains tax on the assets described in
    the existing statute.

    To qualify for the exclusion the asset must have been located
    in Idaho at the time of sale. Assets outlined for favorable
    treatment in Idaho include: real property held at least 18
    months; tangible personal property that was used in
    manufacturing, mining, agriculture, wholesaling or research
    and development held longer than 12 months; cattle or horses
    held for 24 months or more; other breeding livestock held for
    12 months or more; or private timber held for 24 months or
    longer.

                          FISCAL IMPACT

      A reduction in the General Fund of $4,350,000 in 2001 and a
    reduction in the General Fund of $4,715,400 in 2002
    reflecting an 8.4% increase between the two years.

    Contact
    Name:     Rep. Dolores Crow
    Phone:    332-1125
              Rep. Celia Gould
              332-1127
              Rep. Cameron Wheeler
              332-1000
              Rep. Lee Gagner
              332-1000
              Rep. Mike Moyle
              332-1000
              Alex LaBeau, Idaho Association of REALTORS
              342-3585

    STATEMENT OF PURPOSE/FISCAL NOTE             Bill No. H0087