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HB 355 - 2017 conformity bill

HB 355 - 2017 conformity bill

Phil Haunschild
January 23, 2018

Bill description: HB 355 is the 2017 conformity bill, which annually which brings Idaho’s statutes up to date with changes in the federal Internal Revenue Code.

Rating: 0

Analyst’s Note: This bill is not scored because it is not clear what total impact it will have on Idaho taxpayers. Though the first provision in the bill will reduce total tax collections, we cannot weigh this against the second provision, which will increase tax collections at an unspecified amount.

Does it directly or indirectly create or increase any taxes, fees, or other assessments? Conversely, does it eliminate or reduce any taxes, fees, or other assessments? 

HB 355 would update Idaho’s tax code to reflect recent changes in the federal Internal Revenue Code for the current Fiscal Year. When calculating state income taxes for Idaho taxpayers, the federal income tax is generally used as the basis. Bringing the Idaho tax code into line with the federal code simplifies the procedure for filing tax returns and reduces the costs at the State Tax Commission for processing state tax returns. (Note: This is not the main conformity bill that would bring Idaho tax code in line with the majority of the provisions in the Tax Cut and Jobs Act recently passed by Congress which the Governor’s office has described.)

HB 355 has two impacts on Idahoans’ state income taxes. First, it lowers the threshold it takes to claim a medical expense deduction on an income tax return. Second, the legislation would require Idaho’s corporate taxpayers to pay tax on more overseas earnings than they presently do.

HB 355 would lower the medical expense deduction threshold from 10 percent of annual income to 7.5 percent. Thus, if an individual incurs major medical bills they can claim the amount spent as a deduction from the income tax they pay. The Fiscal Note for this bill estimates that this lower threshold would save Idaho taxpayers $6.4 million.

HB 355 would implement the new federal laws governing repatriation, or the manner in which overseas earnings for U.S. companies are taxed when brought back to the U.S. This bill would lower the corporate tax rate paid at the federal level for this repatriation, incentivizing corporations to bring cash and investments back to the U.S.

The changes made at the federal level to the tax code, and incorporated into Idaho law through HB 355, would bring more corporate earnings back to the U.S. and could increase the total corporate tax base of Idaho business. This would increase the total corporate tax paid in Idaho, even though the state corporate tax rate will not have changed. HB 355’s Fiscal Note states that this provision will have an “unknown positive impact” on total tax collections.

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