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LEGISLATURE
OF
THE
STATE
OF
IDAHO
Sixty-eighth
Legislature
Second
Regular
Session
-
2026
IN
THE
HOUSE
OF
REPRESENTATIVES
HOUSE
BILL
NO.
559
BY
REVENUE
AND
TAXATION
COMMITTEE
AN
ACT
1
RELATING
TO
TAXATION;
AMENDING
SECTION
63
-
3004,
IDAHO
CODE,
TO
REVISE
A
PRO
-
2
VISION
REGARDING
THE
APPLICATION
OF
THE
INTERNAL
REVENUE
CODE;
AMENDING
3
SECTION
63
-
3022O,
IDAHO
CODE,
TO
REVISE
PROVISIONS
REGARDING
CERTAIN
4
ADJUSTMENTS;
AMENDING
SECTION
63
-
3029G,
IDAHO
CODE,
TO
REVISE
PROVI
-
5
SIONS
REGARDING
CREDITS
FOR
RESEARCH
ACTIVITIES
CONDUCTED
IN
THIS
STATE
6
AND
CERTAIN
CARRYFORWARD
PROVISIONS;
AND
DECLARING
AN
EMERGENCY
AND
7
PROVIDING
RETROACTIVE
APPLICATION.
8
Be
It
Enacted
by
the
Legislature
of
the
State
of
Idaho:
9
SECTION
1.
That
Section
63
-
3004,
Idaho
Code,
be,
and
the
same
is
hereby
10
amended
to
read
as
follows:
1
1
63
-
3004.
INTERNAL
REVENUE
CODE.
The
term
"Internal
Revenue
Code"
12
means
the
Internal
Revenue
Code
as
amended
and
in
effect
on
the
first
day
of
13
January
2025
2026
,
except
that
:
14
(1)
Internal
Revenue
Code
section
85
is
applied
as
in
effect
on
January
15
1,
2020
;
and
16
(2)
Specified
research
or
experimental
expenditures,
as
defined
in
17
section
174
of
the
Internal
Revenue
Code
as
in
effect
on
December
31,
2024,
18
incurred
in
taxable
years
beginning
on
or
after
January
1,
2022,
and
before
19
January
1,
2025,
shall
continue
to
be
expensed
under
the
Internal
Revenue
20
Code
provisions
as
in
effect
immediately
before
the
enactment
of
section
21
70302
of
P.L.
119
-
21,
rather
than
under
the
provisions
of
section
70302
of
22
P.L.
119
-
21
.
23
SECTION
2.
That
Section
63
-
3022O,
Idaho
Code,
be,
and
the
same
is
hereby
24
amended
to
read
as
follows:
25
63
-
3022O.
ADJUSTMENT
-
-
PROPERTY
ACQUIRED
AFTER
SEPTEMBER
10,
2001
-
-
26
SMALL
BUSINESS
EXPENSES
-
-
LIMITATIONS
ON
ASSESSMENTS
AND
REFUNDS.
For
tax
-
27
able
years
commencing
on
and
after
January
1,
2001,
in
computing
Idaho
tax
-
28
able
income:
29
(1)(a)
The
adjusted
basis
of
depreciable
property,
depreciation,
and
30
gains
and
losses
from
sale,
exchange,
or
other
disposition
of
deprecia
-
31
ble
property
acquired
after
September
10,
2001,
and
before
December
31,
32
2007,
shall
be
computed
without
regard
to
the
bonus
depreciation
avail
-
33
able
under
subsection
subsections
(k)
and
(n)
of
section
168
of
the
In
-
34
ternal
Revenue
Code
and
the
adjusted
basis
of
depreciable
property,
de
-
35
preciation,
and
gains
and
losses
from
sale,
exchange,
or
other
dispo
-
36
sition
of
depreciable
property
acquired
after
December
31,
2009,
shall
37
be
computed
without
regard
to
subsection
subsections
(k)
and
(n)
of
sec
-
38
tion
168
of
the
Internal
Revenue
Code,
provided
that
to
the
extent
a
tax
-
39
payer
cannot
use
the
additional
depreciation
claimed
under
subsection
40
2
subsections
(k)
and
(n)
of
section
168
of
the
Internal
Revenue
Code
in
1
the
current
year
for
federal
income
tax
purposes
because
of
loss
limita
-
2
tions
imposed
by
sections
465,
469,
704(d),
and
1366(d)
of
the
Internal
3
Revenue
Code,
then
such
additional
depreciation
shall
not
be
added
back
4
to
federal
taxable
income
in
order
to
determine
Idaho
taxable
income
in
5
the
current
year,
and
the
current
and
subsequent
year
bonus
deprecia
-
6
tion
adjustments
shall
be
suspended
and
the
add
-
back
and
subtractions
7
shall
be
applied
as
provided
in
this
subsection.
8
(b)
In
subsequent
taxable
years,
the
additional
depreciation
that
was
9
not
added
back
to
federal
taxable
income
in
the
year
it
originated
as
10
provided
in
this
subsection
shall
be
added
back
when
a
prior
loss
that
1
1
has
been
suspended
under
section
465,
469,
704(d),
or
1366(d)
of
the
In
-
12
ternal
Revenue
Code
is
deducted
for
federal
income
tax
purposes
in
the
13
following
manner:
14
(i)
Bonus
depreciation
deducted
for
federal
income
tax
purposes
15
shall
be
added
back
to
Idaho
taxable
income
as
the
losses
suspended
16
under
sections
465,
469,
704(d),
and
1366(d)
of
the
Internal
Rev
-
17
enue
Code
are
utilized,
after
the
utilization
of
all
losses
other
18
than
those
attributable
to
bonus
depreciation;
19
(ii)
The
amount
of
the
bonus
depreciation
add
-
back
shall
be
the
20
full
amount
of
the
add
-
back
less
the
cumulative
allowable
depreci
-
21
ation
amounts
for
Idaho
purposes.
If,
because
of
the
limitations
22
of
sections
465,
469,
704(d),
and
1366(d)
of
the
Internal
Revenue
23
Code,
there
is
a
partial
net
add
-
back,
then
the
net
add
-
back
amount
24
for
future
periods
will
be
adjusted
to
reflect
the
amount
that
was
25
actually
added
back;
26
(iii)
After
the
add
-
back
or
net
add
-
back
has
been
fully
added
back
27
to
Idaho
taxable
income,
the
taxpayer
may
take
the
remaining
de
-
28
ductions
over
the
life
of
the
asset
regardless
of
the
limitations
29
under
sections
465,
469,
704(d),
and
1366(d)
of
the
Internal
Rev
-
30
enue
Code;
31
(iv)
In
the
event
of
a
disposition
of
a
pass
-
through
entity's
own
-
32
ership
interest,
adjustments
shall
be
made
to
the
tax
basis
of
the
33
owner's
interest
of
the
pass
-
through
entity
to
ensure
there
is
no
34
double
deduction
of
expense
or
double
inclusion
of
income.
The
ba
-
35
sis
referred
to
in
this
subparagraph
is
the
basis
to
the
new
owner
36
in
his
ownership
interest
or
the
basis
to
the
owner
who
disposed
of
37
this
ownership
interest,
as
applicable;
and
38
(v)
In
the
event
of
a
disposition
of
a
pass
-
through
entity's
as
-
39
sets
for
which
bonus
depreciation
was
elected
before
the
add
-
back
40
was
fully
realized,
adjustments
shall
be
made
to
ensure
there
is
no
41
double
deduction
of
expense
or
double
inclusion
of
income.
42
(c)
For
determining
the
Idaho
adjusted
income
for
part
-
year
residents
43
or
nonresidents:
44
(i)
When
a
loss
under
section
465,
469,
704(d),
or
1366(d)
of
45
the
Internal
Revenue
Code
is
deducted
for
federal
purposes
and
is
46
sourced
to
Idaho,
the
additional
depreciation
that
was
not
added
47
back
in
the
year
it
originated
as
provided
in
paragraph
(a)
of
this
48
subsection
shall
be
added
back
in
subsequent
years
based
on
the
ap
-
49
3
portionment
factor
in
the
year
the
bonus
depreciation
originated;
1
and
2
(ii)
When
a
loss
under
section
465,
469,
704(d),
or
1366(d)
of
the
3
Internal
Revenue
Code
is
not
sourced
to
Idaho,
the
add
-
back
of
ad
-
4
ditional
depreciation
shall
be
made
in
the
current
taxable
year,
5
notwithstanding
the
provisions
of
paragraph
(a)
of
this
subsec
-
6
tion.
7
(2)
The
loss
limitations
imposed
by
sections
465,
469,
704(d),
and
8
1366(d)
of
the
Internal
Revenue
Code
shall
be
calculated
without
regard
9
to
depreciation
claimed
for
federal
tax
purposes
pursuant
to
subsection
10
subsections
(k)
and
(n)
of
section
168
of
the
Internal
Revenue
Code.
1
1
(3)
Each
partner,
shareholder,
member,
or
beneficiary
shall
include
in
12
Idaho
taxable
income
his
share
of
the
adjustments
required
by
this
section
in
13
computing
Idaho
taxable
income
of
any
pass
-
through
entity.
14
(4)
In
recognition
of
the
fact
that
a
taxpayer
affected
by
this
section
15
may
have
a
different
tax
basis
in
his
pass
-
through
entity
interest
and
a
16
different
carryover
of
loss
limitations
and
amount
at
risk
for
Idaho
tax
pur
-
17
poses
than
for
federal
tax
purposes,
each
partner,
shareholder,
member,
or
18
beneficiary
of
any
pass
-
through
entity
that
claims
the
additional
deprecia
-
19
tion
pursuant
to
subsection
subsections
(k)
and
(n)
of
section
168
of
the
In
-
20
ternal
Revenue
Code
shall
keep
records
of
the
Idaho
tax
basis
of
his
interest
21
in
the
pass
-
through
entity,
the
amount
at
risk,
and
the
balance
of
his
carry
-
22
over
of
Idaho
loss
limitations
in
order
to
confirm
that
the
partner,
share
-
23
holder,
member,
or
beneficiary,
or
any
successor
of
his
interest
by
purchase
24
or
other
means,
does
not
receive
directly
or
indirectly
any
Idaho
income
25
tax
benefit
from
the
additional
depreciation
available
under
subsection
26
subsections
(k)
and
(n)
of
section
168
of
the
Internal
Revenue
Code.
27
(5)
Notwithstanding
the
provisions
of
sections
63
-
3068
and
63
-
3072,
28
Idaho
Code,
the
period
of
limitations
for
issuing
a
notice
of
deficiency
de
-
29
termination
or
filing
a
claim
for
refund
for
any
year
for
which
an
adjustment
30
is
required
by
this
section
shall
not
expire
before
three
(3)
years
from
the
31
later
of:
(a)
the
due
date
of
the
return
for
the
last
taxable
year
an
adjust
-
32
ment
was
required
by
this
section;
or
(b)
the
date
the
return
was
filed
for
33
the
last
taxable
year
an
adjustment
was
required
by
this
section.
Upon
the
34
expiration
of
the
period
of
limitations
as
provided
in
subsections
(a)
and
35
(m)
of
section
63
-
3068,
Idaho
Code,
and
subsections
(b)
and
(h)
of
section
36
63
-
3072,
Idaho
Code,
only
those
specific
items
of
basis,
deductions,
gains,
37
or
losses
that
are
computed
without
regard
to
subsection
subsections
(k)
and
38
(n)
of
section
168
of
the
Internal
Revenue
Code,
as
required
by
this
section,
39
shall
be
subject
to
adjustment,
as
well
as
the
effect
of
such
adjustments
on
40
Idaho
credits,
net
operating
loss
deductions,
and
capital
loss
carryovers.
41
SECTION
3.
That
Section
63
-
3029G,
Idaho
Code,
be,
and
the
same
is
hereby
42
amended
to
read
as
follows:
43
63
-
3029G.
CREDITS
FOR
RESEARCH
ACTIVITIES
CONDUCTED
IN
THIS
STATE
-
-
44
CARRYFORWARD.
45
(1)(a)
Subject
to
the
limitations
of
this
section,
there
shall
be
al
-
46
lowed
to
a
taxpayer
a
nonrefundable
credit
against
taxes
imposed
by
sec
-
47
tions
63
-
3024,
63
-
3025,
and
63
-
3025A,
Idaho
Code,
for
increasing
re
-
48
search
activities
in
Idaho.
49
4
(b)
The
credit
allowed
by
paragraph
(a)
of
this
subsection
shall
be
the
1
sum
of:
2
(i)
Five
percent
(5%)
of
the
excess
of
qualified
research
ex
-
3
penses
for
research
conducted
in
Idaho
over
the
base
amount;
and
4
(ii)
Five
percent
(5%)
basic
research
payments
allowable
under
5
section
41(e)
of
the
Internal
Revenue
Code
for
basic
research
con
-
6
ducted
in
Idaho.
7
(c)
The
credit
allowed
by
paragraph
(a)
of
this
subsection
shall
be
com
-
8
puted
without
regard
to
the
calculation
of
the
alternative
incremental
9
credit
provided
for
in
section
41(c)(4)
of
the
Internal
Revenue
Code
or
10
the
alternative
simplified
credit
provided
for
in
section
41(c)(5)
of
1
1
the
Internal
Revenue
Code.
12
(2)
As
used
in
this
section:
13
(a)
The
terms
"qualified
research
expenses,"
"qualified
research,"
14
"basic
research
payments"
and
"basic
research"
shall
be
as
defined
in
15
section
41
of
the
Internal
Revenue
Code,
except
that
the
research
must
16
be
conducted
in
Idaho.
17
(b)
The
term
"base
amount"
shall
mean
an
amount
calculated
as
provided
18
in
section
41(c)
and
(h)
of
the
Internal
Revenue
Code,
except
that:
19
(i)
A
taxpayer's
gross
receipts
include
only
those
gross
receipts
20
attributable
to
sources
within
this
state
as
provided
in
subsec
-
21
tions
(12)
and
(13)
of
section
63
-
3027,
Idaho
Code;
and
22
(ii)
Notwithstanding
section
41(c)
of
the
Internal
Revenue
Code,
23
for
purposes
of
calculating
the
base
amount,
a
taxpayer:
24
(A)
May
elect
to
be
treated
as
a
start
-
up
company
as
provided
25
in
section
41(c)(3)(B)
of
the
Internal
Revenue
Code,
regard
-
26
less
of
whether
the
taxpayer
meets
the
requirements
of
sec
-
27
tion
41(c)(3)(B)(i)(I)
or
(II)
of
the
Internal
Revenue
Code;
28
and
29
(B)
May
not
revoke
an
election
to
be
treated
as
a
start
-
up
30
company.
31
(3)
The
credit
allowed
by
subsection
(1)(a)
of
this
section
together
32
with
any
credits
carried
forward
under
subsection
(5)
of
this
section
33
shall
not
exceed
the
amount
of
tax
due
under
sections
63
-
3024,
63
-
3025,
and
34
63
-
3025A,
Idaho
Code,
after
allowance
for
all
other
credits
permitted
by
35
this
chapter.
When
credits
earned
in
more
than
one
(1)
taxable
year
are
36
available,
the
oldest
credits
shall
be
applied
first.
37
(4)
In
the
case
of
a
group
of
corporations
filing
a
combined
report
38
under
section
63
-
3027(22),
Idaho
Code,
credit
earned
by
one
(1)
member
of
39
the
group
but
not
used
by
that
member
may
be
used
by
another
member
of
the
40
group.
For
a
combined
group
of
corporations,
any
member
of
the
group
may
41
claim
credit
carried
forward
unless
the
member
who
earned
the
credit
is
no
42
longer
included
in
the
combined
group.
43
(5)
The
credit
allowed
by
subsection
(1)(a)
of
this
section
shall
be
44
claimed
for
the
taxable
year
during
which
the
taxpayer
qualifies
for
the
45
credit.
If
the
credit
exceeds
the
limitation
under
subsection
(3)
of
this
46
section,
the
excess
amount
may
be
carried
forward
for
a
period
that
does
not
47
exceed
the
next
fourteen
(14)
taxable
years.
Any
amounts
deducted
or
amor
-
48
tized
by
a
taxpayer
pursuant
to
section
174
or
174A
of
the
Internal
Revenue
49
Code
that
constitute
qualified
research
expenses,
qualified
research,
basic
50
5
research
payments,
or
basic
research,
as
those
terms
are
defined
in
subsec
-
1
tion
(2)
of
this
section,
shall
not
be
eligible
for
the
credit
provided
in
2
this
section.
3
(6)
In
addition
to
other
needed
rules,
the
state
tax
commission
may
4
promulgate
rules
prescribing,
in
the
case
of
S
corporations,
partnerships,
5
trusts,
or
estates,
a
method
of
attributing
the
credit
under
this
section
to
6
the
shareholders,
partners,
or
beneficiaries
in
proportion
to
their
share
of
7
the
income
from
the
S
corporation,
partnership,
trust,
or
estate.
8
SECTION
4.
An
emergency
existing
therefor,
which
emergency
is
hereby
9
declared
to
exist,
this
act
shall
be
in
full
force
and
effect
on
and
after
its
10
passage
and
approval,
and
retroactively
to
January
1,
2025.
1
1