IDAPA 35.01.01.645 — WATER'S EDGE: TREATMENT OF DIVIDENDS (RULE 645)

Section 63-3027C, Idaho Code
01.
Dividends Received from Payors Incorporated Outside the United States.
(4-6-23)
a.
Dividends received from payors who are incorporated outside the fifty (50) states and District of
Columbia but are not included in the combined report are treated as apportionable income.
(4-6-23)
b.
As provided in Section 63-3027C(e)(1), Idaho Code, amounts included in income under sections
951 and 951A of the Internal Revenue Code are treated as dividends from payors outside the fifty (50) states and
District of Columbia.
(4-6-23)
c.
In order to avoid taxing income that had previously been included in Idaho apportionable income in
a prior tax year, the remaining portion of the dividend that was not excluded from Idaho apportionable income under
Section 63-3027C(c)(3), Idaho Code, is excluded from Idaho apportionable income if the taxpayer can prove that the
income was previously included in Idaho apportionable income in a prior tax year.
(4-6-23)
02.
Dividends Received from Payors Incorporated in the United States. Dividends received from
payors who are incorporated within the fifty (50) states and District of Columbia but not included in the combined
return are presumed to be apportionable income of the water's edge combined group.
(4-6-23)
03.
Deemed Dividends from Possession Corporations. The income of a possession corporation,
excluded in Section 63-3027B(a), Idaho Code, shall be included in apportionable income as a deemed dividend
received from a payor incorporated outside the fifty (50) states and District of Columbia. The income of a possession
IDAHO ADMINISTRATIVE CODE
IDAPA 35.01.01
Idaho State Tax Commission
Income Tax Administrative Rules
Section 646
Page 96
corporation means taxable income greater than zero (0). Losses from possession corporations may not offset income
of other possession corporations in determining the amount of deemed dividends.
(4-6-23)
04.
Dividends from Foreign Sales Corporations.
(4-6-23)
a.
As provided in Section 63-3027C(d)(1), Idaho Code, dividends received from a Foreign Sales
Corporation (FSC) shall be eliminated in the proportion that FSC federal taxable income for the year during which
the dividend was paid bears to the total FSC income before taxes for that year. For purposes of computing the
dividend elimination, total FSC income before taxes means book income before the deduction of federal income
taxes.
(4-6-23)
b.
For example, a FSC paid one million dollars ($1,000,000) in dividends during the taxable year. For
that same taxable year, the FSC had federal taxable income totaling ten million dollars ($10,000,000) and total FSC
income before taxes of twenty million dollars ($20,000,000). The dividends eliminated would be five hundred
thousand dollars ($500,000) computed as follows: (($10,000,000 federal taxable income / $20,000,000 total FSC
income before taxes) X $1,000,000 FSC dividend paid = $500,000 dividend elimination).
(4-6-23)
05.
Interest Expense Offset. The interest expense offset provided in Section 63-3022M, Idaho Code,
does not apply to any dividends subject to the eighty-five percent (85%) or eighty percent (80%) exclusion provided
in Section 63-3027C or 63-3027E, Idaho Code.
(4-6-23)