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IDAHOIDAHOIDAHOIDAHOIDAHO
WATER’S EDGE
ELECTION
PAMPHLET
INCLUDES:
! ! ! ! !DOMESTIC DISCLOSURE
SPREADSHEET INSTRUCTIONS
! ! ! ! !IDAHO WATER’S EDGE INCOME
TAX CODE
! ! ! ! !IDAHO WATER’S EDGE INCOME
TAX ADMINISTRATIVE RULES
! ! ! ! !SPREADSHEETS AND ELECTION AND
CONSENT FORM
IA00401
04/17/01
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| Filing Requirements If your corporation and its affiliates make the water's edge election, Section 63-3027E of the Idaho Income Tax Act requires you to file the Idaho Domestic Disclosure Spreadsheet (Spread- sheet). For each state that requires unitary combined reporting, the Spreadsheet lists the in- come reported, the state's tax liability, and the method used to allocate or apportion income to the state. For all states, the spreadsheet lists the property, payroll, and destination sales. It also identifies your water's edge group and affiliates of which more than 20% of the voting stock is directly or indirectly owned or controlled. You may elect not to file the Spreadsheet. However, if you do not file it, you will receive an 80% dividend exclusion rather than the 85% allowed to those who file the Spreadsheet. You may make this election annually by checking the "Yes" box on line 10.b., Form 41 (Idaho Corporation Income Tax Return). If you do not file the Spreadsheet, you must include with your Form 41, a schedule that identi- fies all foreign and domestic affiliated corporations of which more than 20% of the voting stock is directly or indirectly owned or controlled. The schedule must list each affiliate's federal em- ployer identification number, primary business activity, percentage of ownership by members of the combined group, and the dates acquired and sold (if applicable). You can provide this in- formation on the Form DDS-1, Affiliated Corporations, included with the Spreadsheet. If you file the Spreadsheet, it is due no later than six months after filing the Form 41. Any sub- stitute or computer-produced version of the spreadsheet or subschedules must have the same format as the Tax Commission's forms and include the same information. Form DDS-1, Affiliated Corporations You must file this schedule or a comparable schedule regardless of whether you file the Spread- sheet. The Form DDS-1 lists all affiliated corporations, foreign and domestic, of which more than 20% of the voting stock is directly or indirectly owned or controlled by the corporate parent of your Idaho water's edge group. The following descriptions correspond to the columns in Form DDS-1: Column (a). Assign a number to each corporation included in the water’s edge combined group. The common parent corporation is assigned "corporation number 1," with the other cor- porations numbered in consecutive order. The number assigned to each corporation may be used to refer to that corporation in all subsequent schedules of the Spreadsheet. Column (b). Enter the name and address of the corporate parent of the Idaho combined group and all corporations of which more than 20% of the voting stock is directly or indirectly owned by the parent. Column (c). Enter the federal employer identification number, if any, for each listed corporation. Column (d). Identify the principal business activity. Column (e). Enter the percent of voting stock owned by the group. Column (f). Enter the number from column (a) of the affiliated corporation that owns the voting stock. Water’s Edge Election Pamphlet Page 1 |
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Column (g). Enter the date the affiliate was acquired. If the affiliate is disposed of, enter the date
of the disposition.
Column (h). Enter the following code, if applicable, for each corporation. If the corporation
does not meet any of the following descriptions, leave this column blank.
Code A = Foreign: Corporation incorporated outside the United States or the District of Colum-
bia.
Code B = FSC: "Foreign Sales Corporation" as defined in Section 922(a) of the Internal Rev-
enue Code (IRC).
Code C = Possession Corporation: A U.S. corporation that makes an election under IRC Sec-
tion 936 for federal tax purposes.
Code D = Domestic: Corporation incorporated within the United States or the District of Colum-
bia.
Form DDS-2, Schedule of Income and State Tax Liabilities
List each state that requires unitary combined reporting in which the taxpayer or an affiliate has
a presence for franchise or income tax purposes and for which a tax return is filed. For this
purpose, "state" includes the District of Columbia and U.S. possessions.
The following descriptions correspond to the columns in Form DDS-2.
Column (a). Using the two-letter state abbreviation, identify each state that requires unitary
combined reporting in which the taxpayer or affiliate has a presence for franchise or income tax
purposes and for which a return has been filed.
Column (b). Enter the name of each corporation or corporation number from Form DDS-1, col-
umn (a) required to file a return with that state.
If a single return is filed in the state for a number of corporations (e.g., Idaho allows a single cor-
poration return or group return to be filed for all corporations under Idaho Income Tax Adminis-
trative Rule 365), enter the name of the corporation that filed the return. As to the other corpora-
tions included in the filing, attach Form DDS-2A, State Filing Requirements. This subschedule
lists by state and key name the other corporations included in the return that are also taxable in
the state.
The information required in columns (c) through (i) may be supplied on a cumulative basis oppo-
site the name of the key filing entity.
Column (c). Enter the combined filing designation code (C1, C2, C3, etc.) from Form DDS-2B.
Designations are necessary if there are either multiple combined groups in one state or different
combined groups between states. If identical combined groups are reported in more than one
state, they should be denoted by the same designation. Designations are also required if a cor-
poration conducts, or is part of, more than one business.
Example:Corporations A, B ,C and D were included in the combined report in State S. A similar
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| filing was made in State T. A, B and C were the only corporations included in the combined re- port filed in State U. A and B filed one combined report in State V, and C and D filed another combined report in V. The combined group in States S and T would be C1. The combined group in State U would be C2. The combined groups in State V would be C3 and C4. Column (d). Enter the amount shown on the state tax return that represents net income before state adjustments. This amount should be equivalent to taxable income, as reported on line 30 of Federal Form 1120. Column (e). Enter the amount shown on the state tax return that represents net income after state adjustments (e.g., interest on state and municipal obligations, state and local income taxes, etc.) Column (f). Enter total business income subject to apportionment as it appears on the state tax return. Column (f) should equal column (e) less column (h). Column (g). Enter the apportionment percentage reported to the state. This percentage must be supported by Form DDS-2C, Apportionment Percentage. Column (h). Enter the amount of total nonbusiness income/loss as shown on the state tax re- turn. This is not the amount specifically assigned to the state, but the total amount of nonbusi- ness income/loss reported by the filer or filing group. This amount must be supported by Form DDS-2D, Nonbusiness Income/Loss. Column (i). Enter the amount of column (h), Nonbusiness Income/Loss Total, that is attributable to the state under its rules. This amount must be supported by Form DDS-2D, Nonbusiness In- come/Loss. Column (j). Enter total state net income as it appears on the state tax return. This should be the result of column (f) multiplied by the apportionment percentage shown in column (g), plus the nonbusiness income assigned to the state shown in column (i). To the extent it is not, attach a schedule which reconciles and explains the difference. Column (k). Enter the amount of total income tax or franchise tax, based upon net income, paid to the state. To the extent this amount does not equal column (j) multiplied by the tax rate for the state, attach a schedule which reconciles and explains the difference. Column (l). Enter the amount of sales with a destination into the state. This includes sales of other than tangible personal property. Sales are to be assigned to a destination state. For pur- poses of this schedule, throw-back sales rules are disregarded. This amount must be supported by Form DDS-2E, Destination Sales. Water’s Edge Election Pamphlet Page 3 |
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FORM DDS-2 SUBSCHEDULE INSTRUCTIONS
Form DDS-2A, State Filing Requirements
Form DDS-2A is used to list each state in which the taxpayer or an affiliate has filed a single re-
turn reporting the tax liabilities of a number of corporations. The subschedule must list all corpo-
rations included in the single return that have a taxable presence and filing requirement in that
state.
The following descriptions correspond to the columns in Form DDS-2A:
Column (a). Using the two-letter state abbreviation, identify the state in which a single return is
filed for a number of corporations.
Column (b). Enter the name (or corporation number from Form DDS-1, column (a)) of the key
corporation that filed the return. This name, if listed, must correspond to the entry in column (b)
of Form DDS-2.
Column (c). Enter the names (or corporation numbers from Form DDS-1, column (a)) of the
other corporations included in the return that have a taxable presence and filing requirement in
that state.
Form DDS-2B, Combined Filing Group
Form DDS-2B is used to list each combined filing group used by the taxpayer or an affiliate. The
subschedule must list all corporations included in the group.
The following descriptions correspond to the columns in Form DDS-2B:
Column (a). Enter a combined filing designation code (C1, C2, etc.)
Column (b). Enter the name or corporation number from Form DDS-1, column (a) of each cor-
poration included in the combined filing.
Form DDS-2C, Apportionment Percentage
Form DDS-2C is used to detail the amount of property, payroll and sales attributable to each
state and to calculate the apportionment percentage. If a factor other than property, payroll, or
sales is used by the state, attach a schedule that identifies and details the other factor used. If
the factors are not equally weighted, note the weighting of all factors used.
The following descriptions correspond to the columns in Form DDS-2C:
Column (a). Using the two-letter state abbreviation, identify each state for which a tax return is
filed.
Column (b). Enter the corporation number (from Form DDS-1, column (a) of the key corporation
from column (b) of the Form DDS-1.
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| Column (c). Enter the combined filing designation code from column (c) of Form DDS-2, if ap- plicable. If filing a separate return in the state, enter an S. Column (d). If the taxpayer uses a property factor in determining the amount of income attribut- able to a state, enter the value of the property used in the state, the value of the total property everywhere, and the resulting property factor reported on the return as filed. Column (e). If the taxpayer uses a payroll factor in determining the amount of income attribut- able to a state, enter the amount of compensation paid in the state, total compensation paid ev- erywhere, and the resulting payroll factor reported on the return as filed. Column (f). If the taxpayer uses a sales factor in determining the amount of income attributable to a state, enter the amount of sales attributable to the state, total sales everywhere, and the re- sulting sales factor reported on the return as filed. Column (g). Enter the average apportionment percentage reported on the return filed. Form DDS-2D, Nonbusiness Income/Loss Form DDS-2D is used to detail the amount of nonbusiness income/loss as shown on the return, the state to which the income/loss is assigned, and states in which the income/loss is treated as business income/loss. The following descriptions correspond to the columns in Form DDS-2D: Column (a). Use the two-letter state abbreviation to identify each state. Column (b). Enter the name or corporation number from Form DDS-1, column (a) of the key corporation from column (b) of the Form DDS-2. Column (c). List the types of income/loss reported as nonbusiness income/loss on the return (i.e., dividends, interest, rents, gain/loss from sale of assets, royalties, etc.) Column (e). Enter the state(s) to which each item of income was assigned. If this nonbusiness income was not reported on the return filed in the state to which it was assigned, explain why. Example:For State A, $1,000,000 of dividend income is classified as nonbusiness income, which is not assigned to State A. If this income is not assigned to and reported on the return filed with any other state, no entry would be made in this column. If a portion of the dividend in- come was assigned to and reported on the returns filed with three other states (States B, C, and D), list B, C, and D in column (e) and identify amounts assigned to each. Column (f). If an item of nonbusiness income/loss reported on the return is treated as business income/loss in another state(s), indicate the state in which the income/loss is treated as busi- ness income/loss. Water’s Edge Election Pamphlet Page 5 |
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Form DDS-2E, Destination Sales
Form DDS-2E is prepared on a state-by-state basis. The corporation or group of corporations
having destination sales is identified and the amount is computed. The corporations must also
indicate whether they are immune under P.L. 86-272.
The following descriptions correspond to the columns in Form DDS-2E:
Column (a). Enter the name of each state. For sales made to foreign countries, enter "FC" in
this column (sales made to foreign countries should be collectively listed).
Column (b). Enter the names (or corporation numbers from Form DDS-1, column (a) of all cor-
porations that have destination sales into the state. For sales made to foreign countries, enter
the names of all corporations that have sales with a destination outside the United States.
Column (c). Enter the amount of destination sales (including receipts from services or sales of
other than tangible property) into the state. For sales made to foreign countries, enter the
amount of sales with a destination outside the United States.
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WATER'S EDGE INCOME TAX CODE
63-3027B. WATER’S-EDGE ELECTION. (a) Notwithstanding the provisions of subsections (s) and
(t) of section 63-3027, Idaho Code, a qualified taxpayer, as defined in paragraph (3) of subsection
(b) of this section whose income is subject to the tax imposed under this chapter, may elect to
determine its income derived from or attributable to sources within this state pursuant to a water’s-
edge election in accordance with the provisions of this chapter, as modified by sections 63-3027B
through 63-3027E, Idaho Code. A taxpayer who makes a water’s-edge election shall take into
account the income and apportionment factors of only affiliated corporations in a unitary relationship
with the taxpayer, other than corporations filing elections under section 936 of the Internal Revenue
Code, and which either file a federal income tax return under the Internal Revenue Code or are
included in a federal consolidated return.
(b)For purposes of this section:
(1) The phrase “over fifty percent (50%) of the voting stock directly or indirectly owned or
controlled” shall be substituted for the phrase “at least eighty percent (80%)” each place it
appears in section 1504 of the Internal Revenue Code.
(2) Any combined return shall include only corporations the voting stock of which is more than
fifty percent 50%) owned directly or indirectly by a common owner or owners.
(3) A “qualified taxpayer” is a corporation which files, with the state income tax return on which
the water’s-edge election is made, a consent to the reasonable production of documents within
the taxing jurisdiction. The consent shall remain in effect so long as the water’s-edge election is
in effect.
(4) "Water’s-edge combined group” shall mean all corporations or entities properly includable
in the election of a taxpayer in subsection (a) of this section.
(5) The only income of a foreign sales corporation to be taken into account shall be the
income subject to federal taxation, taking into account the provisions of section 921 of the
Internal Revenue Code.
(c) A water’s-edge election may be disregarded, and the income of the taxpayer determined
without regard to the provisions of this section pursuant to those conditions which may be required
by the state tax commission under subsection (b) of section 63-3027C, Idaho Code, if any
corporation fails to comply with:
(1) The domestic disclosure spreadsheet filing requirements defined in section 63-3027E,
Idaho Code; or
(2) This state’s legal and procedural requirements.
63-3027C. ELECTION IS BINDING -- TREATMENT OF DIVIDENDS. (a) A water’s-edge election
shall be made in the original return for a year and shall be binding for all years thereafter, except as
follows:
(1) If, in the future, the United States supreme court or the supreme court of the state of Idaho
rules t hat there is a state or federal constitutional right for a group of corporations to use the
worldwide unitary method, a water’s-edge combined group of corporations may, without
permission of the tax commission, change its future filing to the worldwide unitary method.
(2) Any changes to use of the water’s-edge method or any other changes beyond those
described in paragraph (1) of this subsection may only occur with the written permission of the
tax commission.
(3) No water’s-edge election shall be made for an income year beginning prior to the operative
date of sections 63-3027B through 63-3027E, Idaho Code.
(b) When disregarding an election or granting a change of election, the tax commission shall
impose conditions which are necessary to prevent the avoidance of tax or to clearly reflect income for
the period the election was made.
(c)For purposes of this section:
(1) Dividends received from payors incorporated outside the fifty (50) states and District of
Columbia, to the extent taxable, shall be treated as income subject to apportionment.
(2) The income of corporations filing elections under section 936 of the Internal Revenue
Code shall be deemed dividends received from payors incorporated outside the fifty (50) states
and District of Columbia.
(3) Eighty-five per cent (85%) of all dividends described in subsection (c)(1) or (c)(2) of this
section shall be excluded from income subject to apportionment.
Water’s Edge Election Pamphlet Page 7
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(4) The dividends subject to apportionment shall be in lieu of any expenses attributable to
such dividend income.
(5) Any actual dividend received from a corporation filing an election under section 936 of the
Internal Revenue Code shall be eliminated from income.
(d)Any dividend from any payor required to be combined under the water’s-edge election shall
be eliminated from the calculation of apportionable income. Dividends received from a
corporation described in section 922 of the Internal Revenue Code (defining “FSC”) will be treated as
follows:
(1) Dividends received from an FSC will be eliminated in the proportion that FSC federal
taxable income for the year, out of which the dividend was paid, bears to the total FSC income
before taxes for such year.
(2) The portion of FSC dividend not eliminated under paragraph (1) of this subsection will be
subject to the eighty-five per cent (85%) exclusion provided for in subsection (c)(3) of this
section.
(e)For purposes of this section:
(1) Amounts included in income by reference to subpart F of part III of subchapter N of chapter
1 of the Internal Revenue Code shall constitute dividends from payors outside the fifty (50)
states and District of Columbia;
(2) Amounts included in income under part VI of subchapter P of chapter 1 of the Internal
Revenue Code shall constitute dividends from payors outside the fifty (50) states and the District
of Columbia; and
(3) Deemed distributions defined by Section 78 of the Internal Revenue Code shall be
excluded from the income of the water’s-edge combined group.
63-3027D. PRESUMPTIONS AND BURDENS OF PROOF. (a) A qualified taxpayer and its affiliates
shall be presumed to be a part of a unitary business and all income of that business shall be
resumed to be apportionable business income if a valid water’s-edge election has been made,
except as provided in subsections (c) and (d) of section 63-3027C, Idaho Code.
(b) A taxpayer shall have the burden of proof regarding the issue of whether or not a
corporation is a member of a water’s-edge combined group.
63-3027E. OPERATIVE DATES. (a) Sections 63-3027B through 63-3027E, Idaho Code, shall be
operative for the computation of taxes for the earlier of either of the following:
(1) Taxable years beginning on or after January 1, 1988.
(2) Taxable years beginning on or after January 1 of the year after the year in which the board
of examiners, upon advice of the attorney general, certifies to the tax commission that action
has been taken by the United States, whether by statute, regulation, executive order, or any
other means as may be appropriate, to comply substantially with the following:
(A) A requirement that any corporation required to file a United States tax return or which
could be included in a consolidated federal tax return be required to file with the Internal
Revenue Service a domestic disclosure spreadsheet if its payroll, property, or sales in a
foreign country exceeds one million dollars ($1,000,000). The spreadsheet shall provide
for full disclosure as to the incomen reported to each state, the state tax liability, and the
method used for apportioning or allocating income to the states, and any other information
as provided for by regulations as may be necessary to determine properly the amount of
taxes due to each state and to identify the water’s-edge corporate group and those of its
affiliates of which more than twenty per cent (20%) of the voting stock is directly or
indirectly owned or controlled by a common owner or owners.
(B) That the information filed pursuant to paragraph (2)(A) of this subsection will be
available to qualified states. A “qualified state” is any state that does not require the use of
the worldwide unitary method of taxation except in circumstances substantially similar to
those authorized in subsection (c) of section 63-3027B, Idaho Code.
(C) That qualified states are authorized access to all material developed by the Internal
Revenue Service in its examination of multinational operations.
(b) If sections 63-3027B through 63-3027E, Idaho Code, become operative pursuant to
paragraph (1) of subsection (a) of this section, the tax commission may require, and taxpayers
described in this subsection must file, no later than six months after filing the Idaho income tax
return, a spreadsheet to provide disclosure as to the income reported for the year to the other states
that require unitary combined reporting, the tax liability for each such state, the method used for
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allocating or apportioning income to such states, the property, payroll, and destination sales of the
water's edge corporate group in each state, and to identify the water’s-edge corporate group and
those of its affiliates of which more than twenty per cent (20%) of the voting stock is directly or
indirectly owned or controlled by a common owner or owners. The provisions of this subsection shall
apply only to corporations which both make a water’s-edge election and have during the taxable
year, payroll, property or sales in a foreign country which exceeds one million dollars ($1,000,000).
Notwithstanding the requirement to file a spreadsheet in any tax year, a taxpayer may forego filing
such a spreadsheet by submitting to the state tax commission a written declaration of its intention to
forego filing such spreadsheet for such year. In the event such declaration is filed in any tax year, no
spreadsheet shall be required of such taxpayer and the percentage to be applied under section 63-
3027C(c)(3) for such year shall be eighty per cent (80%) rather than eighty-five per cent (85%).
Water's Edge Income Tax Administrative Rules
-- IDAPA 35.01.01.640 - 35.01.01.646
640. WATER’S EDGE -- MAKING THE ELECTION (Rule 640).
Section 63-3027B, Idaho Code. (3-20-97)
01.In General. Rules 640 through 649 of these rules apply to taxpayers electing to use the
water’s edge filing method. To the extent that these rules conflict with any other rules pursuant to this
Act, Rules 640 through 649 of these rules control. (3-20-97)
02.The Election. The water’s edge election is made for purposes of determining which corpo-
rations are included in a combined report for Idaho income tax purposes. The election must be made in
accordance with Sections 63-3027B through 63-3027E, Idaho Code, and Rules 640 through 649 of
these rules. (3-20-97)
a. The election can be made for a year beginning on or after January 1, 1993. See Rule 643 of
these rules for Change of Election. (3-20-97)
b. All taxpayers required to file an Idaho return and included in the water’s edge combined
group must make the election. The election must be made on a form provided by the Tax Commission.
If the group makes a joint election, a list of each corporation required to file must be provided. A joint
election must be signed by an individual authorized to bind all companies to the election.(3-20-97)
c. Idaho taxpayers having a valid water’s edge election shall compute Idaho taxable income in
accordance with Sections 63-3027 and 63-3022, Idaho Code, except as modified by Sections 63-
3027B through 63-3027E, Idaho Code, and Rules 640 through 649 of these rules. (3-20-97)
03.Failure To Include Election. Failure to include the election with the first return to which the
election applies results in Idaho taxable income being determined in accordance with Sections 63-
3027 and 63-3022, Idaho Code. (3-20-97)
641. WATER’S EDGE -- ELEMENTS OF A COMBINED REPORT (Rule 641).
Section 63-3027B, Idaho Code. (3-20-97)
01.Income. Income for the water’s edge combined group is computed on the same basis as
taxable income subject to modifications contained in Sections 63-3022 and 63-3027, Idaho Code, and
related rules. Intercompany transactions between members of the water’s edge combined group shall
Water’s Edge Election Pamphlet Page 9
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be eliminated. Transactions between a member of the water’s edge combined group and a nonincluded
affiliated corporation shall be included in the computation of the income of the water’s edge combined
group. (3-20-97)
02.Factors. The rules for inclusion, value, and attribution of apportionment factors by location
for the water’s edge combined group shall be determined pursuant to Section 63-3027, Idaho Code,
and related rules. When computing the apportionment factors of the water’s edge combined group,
intercompany transactions between members of the group shall be eliminated. Transactions between
a member of the water’s edge combined group and a nonincluded affiliated corporation shall be in-
cluded, if appropriate, when determining apportionment factors. Dividends, to the extent included in
apportionable income, shall be included in the sales factor computation. (3-20-97)
642. WATER’S EDGE -- LEGAL AND PROCEDURAL REQUIREMENTS (Rule 642). Section 63-
3027B, Idaho Code. (3-20-97)
01.Required Form. Proper filing of the water’s edge election and consent for production of
records must be made on the form provided by the Tax Commission and included in the original income
tax return for the first tax year to which the election applies. (3-20-97)
02.Required Information. The following information must be included with each year’s tax
return for which a water’s edge election applies: (3-20-97)
a. A complete list of all affiliated corporations, foreign and domestic, of which more than twenty
percent (20%) of the voting stock is, directly or indirectly, owned or controlled by a common owner;
(3-20-97)
b. Identifying information for each member of the water’s edge combined group, including: fed-
eral identification number, primary business activities, percent of ownership by members of the com-
bined group, and dates of acquisition or disposition of interest; (3-20-97)
c. A copy of the federal consolidated return, if applicable; and (3-20-97)
d. A schedule of taxable income for each possession corporation excluded from the water’s
edge group pursuant to Section 63-3027B(a), Idaho Code. (3-20-97)
643. WATER’S EDGE -- CHANGE OF ELECTION (Rule 643).
Section 63-3027C, Idaho Code. (3-20-97)
01.In General. Except as provided in Section 63-3027C(a) (1), Idaho Code, the taxpayer must
submit a written petition to the Tax Commission and be granted written permission to change its report-
ing method from water’s edge for any subsequent tax year. (3-20-97)
a. A change in the reporting method includes conversion from the water’s edge filing method to
the worldwide filing method as well as the addition of companies previously omitted or the exclusion of
companies previously included in the water’s edge combined group, except in the case of companies
acquired or disposed of during the taxable year. (3-20-97)
b. The Tax Commission may determine that one or more affiliated corporations should be in-
cluded or excluded from the water’s edge combined group. Income and apportionment factors shall be
modified accordingly. (3-20-97)
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02.Written Petition. A written petition must include the following: (3-20-97)
a. An explanation of the legal or factual basis for requesting the change of reporting method;
and (3-20-97)
b. A computation of the taxpayer’s Idaho taxable income and tax liability computed using both
the prior reporting method and the method the taxpayer is petitioning to use for the year of change.
(3-20-97)
03.Due Date For Filing The Written Petition. The written petition requesting the change of
reporting method must be filed with the Tax Commission at least thirty (30) days prior to the due date for
filing the tax return. (3-20-97)
04.Failure To Provide Required Information. Failure to provide complete and accurate infor-
mation necessary for the Tax Commission’s review of the petition constitutes grounds for denial of the
taxpayer’s petition or disregard of the taxpayer’s election. (3-20-97)
05.Approval Attached To Original Return. A copy of the Tax Commission’s written approval of
the change in reporting method must be attached to the original return for the year in which the change
is first made. (3-20-97)
06.Appeal Rights. A taxpayer may appeal the Tax Commission’s denial of a request to change
the method of filing, by submitting a written letter of protest within sixty-three (63) days from date of the
denial. If permission to change its filing method is denied, the taxpayer shall continue to file its income
tax return with the method used in the previous year. If the appeal is resolved in the taxpayer’s favor,
the taxpayer may file an amended return for the year of change. (3-20-97)
644. WATER’S EDGE -- DISREGARDING THE ELECTION (Rule 644).
Sections 63-3027B and 63-3027C, Idaho Code. If a taxpayer fails to comply with Sections 63-3027B
through 63-3027E, Idaho Code, and Rules 640 through 649 of these rules, the Tax Commission may
disregard the water’s edge election or recompute the water’s edge combined income and apportion-
ment factors, and assert penalties pursuant to Section 63-3046, Idaho Code, and Rules 400 through
419 of the Administration and Enforcement Rules. (3-20-97)
645. WATER’S EDGE -- TREATMENT OF DIVIDENDS (Rule 645).
Section 63-3027C, Idaho Code. (3-20-97)
01.Dividends Received From Payors Incorporated Outside The United States. 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 business income. These dividends are treated as
business income of the water’s edge combined group even if paid from earnings included in the taxpayer’s
combined report in prior years. (3-20-97)
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 business income of the water’s edge combined group.
(3-20-97)
03.Deemed Dividends From Possession Corporations. The income of a possession corpora-
tion, excluded in Section 63-3027B(c), Idaho Code, shall be included in business income as a deemed
dividend received from a payor incorporated outside the fifty (50) states and District of Columbia. The
income of a possession corporation means taxable income greater than zero (0). Losses from posses-
Water’s Edge Election Pamphlet Page 11
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sion corporations may not offset income of other possession corporations in determining the amount of
deemed dividends. (4-5-00)
04.Dividends From Foreign Sales Corporations. (4-5-00)
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. (4-5-00)
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 divi-
dends 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) . (4-5-00)
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. (4-5-00)
646. WATER’S EDGE -- DOMESTIC DISCLOSURE SPREADSHEET (Rule 646).
Section 63-3027E, Idaho Code. (3-20-97)
01.Filing Requirements. The domestic disclosure spreadsheet required by Section 63-3027E(b),
Idaho Code, must be filed no later than six (6) months after filing the original return unless the taxpayer
makes a declaration to forego the filing of the spreadsheet. The declaration is made on a year by year
basis. (7-1-98)
02.Spreadsheet Information. The spreadsheet information must be submitted using the forms
contained in the Tax Commission’s “Idaho Water’s Edge Election Pamphlet,” or on identically formatted
forms that disclose the same information. (7-1-98)
Page 12 Water’s Edge Election Pamphlet
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INCOME YEAR ENDED: F.E.I.N.: ADDRESS: FILER:
1. No. (a)
Common Parent Corporation
Name and Address of Corporation
(b)
IDAHO DOMESTIC DISCLOSURE SPREADSHEET
FEIN (if any)
AFFILIATED CORPORATIONS
(c)
*
Type of Corporation: A - FOREIGN B - DISC/FSC C - POSSESSION CORPORATION D - DOMESTIC FORM DDS-1
Principal Business Activity
(d)
Percentage of
Ownership
(e)
Number of Owners
(from (a)) Corporation
(f)
Acquired Date(s)
(Sold)
(g)
Corporation *
Type of
(h)
3-06-01 IA00410
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INCOME YEAR ENDED: FILER:
State (a)
Corporation Number
Key Name
or (b)
IDAHO DOMESTIC DISCLOSURE SPREADSHEET
Designation Code Combined Filing
NONBUSINESS INCOME/LOSS
(c)
FORM DDS-2, Page 1
State Adjustments Net Income Before
(d)
State Adjustments Net Income After
(e)
Business Income
(f)
3-22-01 IA00420
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INCOME YEAR ENDED: FILER:
State
Corporation Number
Key Name
or
SCHEDULE OF INCOME AND STATE TAX LIABILITIES
Percentage (From IDAHO DOMESTIC DISCLOSURE SPREADSHEET
Form DDS-2C) Apportionment
(g)
(From Form DDS-2D)
Income/Loss Total FORM DDS-2, Page 2
Nonbusiness
(h)
(From Form DDS-2D)
Allocated to State
Income/Loss Nonbusiness
(i)
State Income Total
(j)
State Tax
(k)
(From Form DDS-2E)
Destination Sales
(l)
3-06-01 IA00430
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(In support of column (b) of the Schedule of State Tax Liabilities (Form DDS-2)) INCOME YEAR ENDED: FILER:
State
(a)
Corporation Number
Key Name
or (b)
IDAHO DOMESTIC DISCLOSURE SPREADSHEET
Corporation Names (or Numbers) of Affiliated Taxpayers Included in the Return Which are Taxable in the State (Identified
STATE FILING REQUIREMENTS
FORM DDS-2A
in Column a)
(c)
3-06-01 IA00440
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(In support of column (c) of the Schedule of State Tax Liabilities (Form DDS-2)) INCOME YEAR ENDED: FILER:
Designation Code
Filing
(a)
IDAHO DOMESTIC DISCLOSURE SPREADSHEET
COMBINED FILING GROUP
FORM DDS-2B
Members of the Combined/Consolidated Group
Corporation Names (or Numbers) of
(b)
3-22-01 IA00450
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(In support of column (g) of the Schedule of State Tax Liabilities (Form DDS-2)) INCOME YEAR ENDED: FILER:
State (a)
Number Corporate
(b)
tion Code Designa-
Filing (c)
Numerator
PROPERTY
Denominator (d) IDAHO DOMESTIC DISCLOSURE SPREADSHEET
APPORTIONMENT PERCENTAGE
Percent
Numerator FORM DDS-2C
PAYROLL
Denominator (e)
Percent
Numerator
SALES
Denominator (f)
Percent
Return as Filed Average Factor
per (g)
3-22-01 IA00460
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(In support of columns (h) and (i) of the Schedule of State Tax Liabilities (Form DDS-2)) Complete for each corporation with nonbusiness income. Identify the states which differ in their treatment of items included in column (e). INCOME YEAR ENDED: FILER:
State (a)
Corporation Number
Key Name
or (b)
IDAHO DOMESTIC DISCLOSURE SPREADSHEET
Type of Income/Loss
NONBUSINESS INCOME/LOSS
(c)
FORM DDS-2D
Amount
(d)
State(s) to Which Income/Loss
as Filed With Such State(s)
is Allocated on Return,
(e)
State(s) in Which Income/Loss
is Treated as Business
Income/Loss
(f)
3-06-01 IA00470
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(In support of column (l) of the Schedule of State Tax Liabilities (Form DDS-2)) INCOME YEAR ENDED: FILER:
State (a)
Corporation Name (or Number) With
Destination Sales Into The State
(b)
IDAHO DOMESTIC DISCLOSURE SPREADSHEET
DESTINATION SALES
FORM DDS-2E
Amount of Destination Sales
(c)
Yes
Immune From Taxation Under
P.L. 86-272
(d)
No
3-06-01 IA00480
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F
O
R14IA00390IDAHO WATER’S EDGE ELECTION AND CONSENT FORM
M11-06-00
Name as shown on return Federal employer identification number
Calendar year ________ or fiscal year ending _________________________________
Attach this form to the Idaho Corporation Income Tax Return, Form 41, for the first year the election is
made. For subsequent years a new election and consent form is necessary only if a corporation with an
Idaho filing requirement is added to the water’s edge combined group.
ELECTION
We elect to determine the income derived from, or attributed to, sources within Idaho, pursuant to
a Water’s Edge Election.
CONSENT
By electing the water’s edge method, we agree to identify the water’s edge combined group and
those of its affiliates of which more than 20% of the voting stock is directly or indirectly owned or
controlled by a common owner or owners.
In order to receive the 85% dividend exclusion, we consent to file the Idaho Domestic Disclosure
Spreadsheet (Spreadsheet) no later than six months after filing our Idaho Corporation Income Tax
Return. We also agree to provide the required information and supporting documents as requested
regarding the income reported to each state that requires unitary combined reporting for the year,
the tax liability for each such state, the method used for allocating or apportioning income to such
states, and the property, payroll, and destination sales in each state.
If we elect to forego filing the Spreadsheet, we will receive an 80% dividend exclusion. An election
to forego filing the Spreadsheet will be made by checking the "Yes" box on Form 41, Idaho Corpo-
ration Income Tax Return.
CHANGE OF METHOD
We understand that the Water’s Edge Election is binding and may be changed only with written
permission from the Tax Commission. A written petition requesting the change of reporting method
must be filed at least 30 days prior to the due date for filing the tax return not including extensions
of time to file.
REVOCATION - ADJUSTMENT
Failure to provide the required information and supporting documents may result in revocation of
the Water’s Edge Election or recomputation of the Water’s Edge combined income and apportion-
ment factors as well as the imposition of penalties.
JOINT ELECTION
List the separate corporations included in the Water’s Edge combined group that are required to file
in Idaho.
Corporation Name Corporation’s Federal E.I.N.
AUTHORIZED SIGNATURE
I am authorized to bind the corporation (corporations) named above to this Water’s Edge Election
and Consent.
Signature
Title Date
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