Current through August 31, 2023
Section
63-3027, Idaho Code
01.
The Concept of a Unitary
Business. (4-6-23)
a. A unitary
business is a single economic enterprise that is made up either of separate
parts of a single business entity or of a commonly controlled group of business
entities that are sufficiently interdependent, integrated and interrelated
through their activities so as to provide a synergy and mutual benefit that
produces a sharing or exchange of value among them and a significant flow of
value to the separate parts. This flow of value to a business entity located in
Idaho that comes from being part of a unitary business conducted both within
and without Idaho is what provides the constitutional due process "definite
link and minimum connection" necessary for Idaho to apportion apportionable
income of the unitary business, even if that income arises in part from
activities conducted outside Idaho. The apportionable income of the unitary
business is then apportioned to Idaho using an apportionment percentage
provided by Section
63-3027, Idaho Code.
(4-6-23)
b. This sharing or
exchange of value may also be described as requiring that the operation of one
(1) part of the business be dependent upon, or contribute to, the operation of
another part of the business. Phrased in the disjunctive, the foregoing means
that if the activities of one (1) business either contribute to the activities
of another business or are dependent upon the activities of another business,
those businesses are part of a unitary business. (4-6-23)
02.
Constitutional Requirement for a
Unitary Business. (4-6-23)
a. The
sharing or exchange of value described in Subsection
340.01 of this rule that defines
the scope of a unitary business requires more than the mere flow of funds
arising out of a passive investment or from the financial strength contributed
by a distinct business undertaking that has no operational relationship to the
unitary business. (4-6-23)
b. In
Idaho, the unitary business principle will be applied to the fullest extent
allowed by the U.S. Constitution. The unitary business principle will not be
applied to result in the combination of business activities or entities under
circumstances where, if it were adverse to the taxpayer, the combination of
such activities or entities would not be allowed by the U.S. Constitution.
(4-6-23)
03.
Separate Trades or Businesses Conducted Within a Single Entity. A
single entity may have more than one (1) unitary business. In such cases it is
necessary to determine the business, or apportionable, income attributable to
each separate unitary business as well as its nonapportionable income, which is
specifically allocated. The apportionable income of each unitary business is
then apportioned by a formula that takes into consideration the in-state and
the out-of-state factors that relate to the respective unitary business whose
income is being apportioned. (4-6-23)
04.
Unitary Business Unaffected by
Formal Business Organization. A unitary business may exist within a
single business entity or among a commonly controlled group of business
entities. The relationship is to be determined by reference to the relationship
that exists between all related and affiliated corporations, not just those
corporations whose income and apportionment factors are required to be
considered. For example, the relationship with foreign affiliates is to be
considered even though a water's edge election is made. A related corporation
may include insurance companies and fifty percent (50%) or less owned
corporations. The scope of what is included in a commonly controlled group of
business entities is set forth in Rule
344 of these rules.
(4-6-23)
