IDAPA 35.01.01.334 — APPORTIONABLE AND NONAPPORTIONABLE INCOME DEFINED: RELATIONSHIP OF

TRANSACTIONAL AND FUNCTIONAL TESTS TO U.S. CONSTITUTION (RULE 334).
Section 63-3027(1)(a), Idaho Code
The Due Process Clause and the Commerce Clause of the U.S. Constitution restrict states from apportioning income
as apportionable income that has no rational relationship with the taxing state. The protection against extraterritorial
state taxation afforded by these Clauses is often described as the "unitary business principle." The unitary business
principle requires apportionable income to be derived from the same unitary business that is being conducted at least
in part in Idaho. The unitary business that is conducted in Idaho includes both a unitary business that the taxpayer
alone may be conducting and a unitary business the taxpayer may conduct with any other person or persons.
Satisfaction of either the transactional test or the functional test complies with the unitary business principle, because
each test requires that the transaction or activity (in the case of the transactional test) or the property (in the case of
the functional test) to be tied to the same trade or business that is being conducted within Idaho. Determination of the
scope of the unitary business being conducted in Idaho is without regard to the extent to which Idaho requires or
permits combined reporting.
(4-6-23)