Idaho — Corporate Income / Franchise Tax

Idaho imposes a corporate income tax on the Idaho taxable income of every corporation (other than an S corporation) that transacts business in Idaho, is authorized to transact business in Idaho, or has income attributable to Idaho. The tax applies to C corporations doing business in or deriving income from Idaho sources, regardless of where they are incorporated or headquartered.

For taxable years beginning on or after January 1, 2025, the tax rate is 5.3% of Idaho taxable income. The tax must not be less than a $20 minimum; nonproductive mining corporations are exempt from the minimum.

S corporations generally are not subject to the corporate income tax, but may be taxed on net recognized built-in gain attributable to Idaho and excess net passive income attributable to Idaho.

Corporations taxed under the franchise tax provisions of Idaho Code § 63-3025A are not subject to this corporate income tax.

Source: Idaho Code § 63-3025

Idaho corporate income tax begins with federal taxable income as determined under the Internal Revenue Code. Idaho taxable income is defined as that federal taxable income as modified by the Idaho adjustments specifically provided in Title 63, Chapter 30.

Source: Idaho Code § 63-3011B; Idaho Code § 63-3011C

For tax years beginning on or after January 1, 2022, Idaho apportions multistate corporate income using a single-sales-factor formula. Apportionable income is multiplied by a fraction: the numerator is total sales in Idaho during the tax period, and the denominator is total sales everywhere during the tax period.

Certain taxpayers may elect a three-factor formula (property, payroll, and sales, equally weighted). Eligible taxpayers include electrical corporations, telephone corporations, communications companies, and taxpayers subject to special industry regulations under Idaho Code § 63-3027(18).

Source: Idaho Code § 63-3027(10)

Idaho imposes corporate income tax on every corporation (other than an S corporation) that transacts or is authorized to transact business in Idaho or has income attributable to Idaho. The Idaho State Tax Commission states that doing business includes owning or leasing property in Idaho, soliciting business in Idaho, being a member of a partnership or S corporation with Idaho business, having any Idaho activity producing income, or having an agent acting on the corporation's behalf in Idaho. A corporation under the protection of Public Law 86-272 is exempt from filing an Idaho income tax return.

Source: Idaho Code § 63-3025(1); Idaho State Tax Commission, Income Tax for Corporations

Idaho corporate income tax returns must be filed on or before the 15th day of the fourth month following the close of the taxable year. For calendar-year filers, this means an April 15 deadline. If the deadline falls on a Saturday, Sunday, or legal holiday, the return is timely if filed on the next business day.

Source: Idaho Code § 63-3032; Idaho State Tax Commission, Business Income Tax Filing

Idaho determines which sales are included in the Idaho sales-factor numerator under market-based sourcing principles for sales other than tangible personal property, effective for tax years beginning on or after January 1, 2022. Prior to that date, Idaho used a cost-of-performance method. The sourcing rules are essential for applying Idaho's single-sales-factor apportionment formula.

Tangible personal property

Under Idaho Code § 63-3027(12), sales of tangible personal property (including gross receipts from leases and other uses of tangible personal property) are in Idaho if:

• The property is delivered or shipped to a purchaser, other than the United States government, within Idaho, regardless of f.o.b. point or other conditions of the sale; or
• The property is shipped from an office, store, warehouse, factory, or other place of storage in Idaho, and either (i) the purchaser is the United States government, or (ii) the taxpayer is not taxable in the state of the purchaser.

The second prong functions as a throwback rule: sales shipped from Idaho to a state where the taxpayer lacks nexus are sourced to Idaho.

Sales other than tangible personal property

Idaho Code § 63-3027(13) provides that sales other than sales of tangible property are in Idaho if the taxpayer's market for the sales is in Idaho. This market-based sourcing standard applies to services, intangibles, and other non-tangible-property receipts. The statute does not elaborate on how to determine where the taxpayer's market is located; practitioners should consult Idaho Administrative Code rules promulgated under § 63-3027(24) for detailed guidance on market assignment by transaction type. The Idaho State Tax Commission finalized market-based sourcing regulations in April 2023, following the conclusion of the 2023 legislative session.

Reasonable approximation

If the state or states of assignment under the market-based sourcing rule cannot be determined, Idaho Code § 63-3027(14) requires that the state or states of assignment be reasonably approximated.

Cost-of-performance election for communications companies

Communications companies (as defined in § 63-3027) may elect under Idaho Code § 63-3027(15) to use a cost-of-performance method for sourcing sales other than sales of tangible personal property. Under that election, sales other than sales of tangible personal property are in Idaho if (a) all the income-producing activity is performed in Idaho, or (b) the income-producing activity is performed both in and outside Idaho and a greater proportion of the income-producing activity is performed in Idaho than in any other state, based on costs of performance. This election offers an alternative to market-based sourcing for a narrow category of taxpayers.

Effective date

The market-based sourcing regime took effect for tax years beginning on or after January 1, 2022, when Idaho simultaneously moved from a three-factor apportionment formula (with double-weighted sales) to a single-sales-factor formula. For tax years beginning before January 1, 2022, Idaho sourced sales other than sales of tangible personal property under the cost-of-performance method described in the prior version of § 63-3027.

Source: Idaho Code § 63-3027(12)–(15)

Idaho requires combined reporting for affiliated corporations that meet both an ownership test and a unitary business test. The default method is worldwide combined reporting, but taxpayers may elect water's edge treatment.

Ownership threshold

Under Idaho Code § 63-3027(22), combined reporting is required when the voting stock of two or more corporations, wherever incorporated, is more than 50% owned directly or indirectly by a common owner or owners, and when such reporting is necessary to accurately reflect income. The 50% ownership threshold applies to direct or indirect ownership structures.

Unitary business test

Once the ownership threshold is met, Idaho taxable income of any corporation subject to taxation in Idaho is determined by a combined report that includes the income of all corporations that are members of a unitary business. The statute requires allocation and apportionment using combined apportionment factors for all corporations included in the combined report and methods set out in § 63-3027. The use of a combined report does not disregard the separate corporate identities of the members of the unitary group; each corporation transacting business in Idaho remains responsible for its apportioned share of the combined apportionable income plus its nonapportionable income or loss allocated to Idaho, minus its net operating loss carryover or carryback.

Income computation for combined group members

For corporations incorporated in the United States or included in a consolidated federal corporation income tax return, the income included in the Idaho combined report is the federal taxable income for the corporation after making appropriate adjustments under Idaho Code § 63-3022. For corporations incorporated outside the United States but not included in a consolidated federal return, the income included is the net income before income taxes stated on the profit and loss statements included within the consolidated profit and loss statement prepared for filing with the U.S. Securities and Exchange Commission (or, if not required to file with the SEC, the profit and loss statement prepared for shareholders and reviewed by an independent auditor). Alternatively, foreign corporations may adjust their profit and loss statements to conform to tax accounting standards required by the Internal Revenue Code, subject to Idaho adjustments.

Worldwide combined reporting (default method)

Idaho requires the worldwide filing method for all corporations unless a water's edge election is made. Under the worldwide method, the combined report must include the income or loss and apportionment factor attributes of all unitary corporations with more than 50% common ownership, including corporations incorporated outside the United States.

Water's edge election

A qualified taxpayer whose income is subject to Idaho corporate income tax may elect to determine its income derived from or attributable to sources within Idaho pursuant to a water's edge election under Idaho Code §§ 63-3027B through 63-3027E. A taxpayer making a water's edge election takes into account the income and apportionment factors of all affiliated corporations in a unitary relationship with the taxpayer, other than corporations filing elections under Internal Revenue Code § 936 (as excluded by Idaho Code § 63-3027B(a)), and which either file a federal income tax return or are included in a federal consolidated return. Under the water's edge method, foreign corporations are excluded from the combined report unless they are included in a federal consolidated return.

The water's edge election also affects dividend treatment. Taxpayers making a water's edge election exclude from apportionable income a portion of dividends received or deemed received from foreign corporations. The exclusion percentage is 85% if the taxpayer files a domestic disclosure spreadsheet within six months of filing the original return, or 80% if the taxpayer opts out of filing the spreadsheet. The election must be made annually.

A "qualified taxpayer" eligible to make the water's edge election is a corporation that files, with the state income tax return on which the election is made, a consent to the reasonable production of documents within the taxing jurisdiction. The consent remains in effect as long as the water's edge election is in effect.

The water's edge provisions have been operative for taxable years beginning on or after January 1, 1988, under Idaho Code § 63-3027E(a)(1).

Source: Idaho Code § 63-3027(22); Idaho Code § 63-3027B; Idaho Code § 63-3027E; Idaho State Tax Commission, Worldwide vs. Water's Edge

Idaho requires corporations subject to the corporate income tax to make quarterly estimated tax payments when two statutory conditions are both met under Idaho Code § 63-3036A(a): (1) the corporation is required to make federal estimated tax payments to the Internal Revenue Service, and (2) the corporation will have an Idaho income tax liability of $500 or more. The Idaho State Tax Commission states that corporations are not required to make estimated payments in their first year of doing business in Idaho; after that first year, the dual-condition test applies.

Estimated tax calculation — prior-year safe harbor and 90% rule

Idaho Code § 63-3036A(c)(1) provides that each quarterly payment is 25% of the lesser of:

• The tax amount required to be reported on the return for the immediately preceding taxable year (the prior-year safe harbor), or
• 90% of the tax required to be paid with the current year's return.

Meeting the prior-year safe harbor (100% of the prior year's liability in four equal installments) protects a corporation from underpayment interest even if current-year liability is higher. The 90% threshold avoids underpayment interest when the corporation's current-year liability exceeds the prior-year amount.

Due dates

Idaho Code § 63-3036A(b) states that the provisions of the Internal Revenue Code relating to determination of reporting periods and the due dates of estimated tax payments apply to Idaho estimated payments. For calendar-year C corporations, this means payments are due on the 15th day of the 4th, 6th, 9th, and 12th months of the taxable year—April 15, June 15, September 15, and December 15 for a calendar-year filer. The Form 41EST instructions confirm these quarterly due dates.

Annualized income method

Idaho Code § 63-3036A(c)(2) provides that any corporation that makes annualized estimated payments under the Internal Revenue Code is permitted to annualize its Idaho estimated payments "in the manner prescribed by regulation of the state tax commission." This allows corporations with uneven income throughout the year to calculate each installment based on annualized income to date rather than using equal installments.

Underpayment interest

Idaho Code § 63-3046A(a) requires the State Tax Commission to assess interest on unpaid or underpaid estimated taxes at the rate specified in Idaho Code § 63-3045 (the general deficiency interest rate). Under § 63-3046A(b), interest is computed on the difference between the amount of estimated tax payment required to be made on each voucher and the amount actually made, running from the due date of the estimated payment until the required amount is paid or until the due date of the return (excluding extensions), whichever is earlier. The Form 41EST instructions state that the interest rate for 2025 is 6%.

Payment methods and forms

Estimated tax payments are made using Form 41ES (previously called Form 41EST). The Idaho State Tax Commission's instructions state that corporations may pay electronically using the Quick Pay option on the Tax Commission's website or by mailing a check with the Form 41ES voucher. The Form 41 instructions for the corporate income tax return state that payments of $100,000 or more must be made by ACH Debit or ACH Credit (electronic funds transfer).

Relation to the annual return

Idaho Code § 63-3036A(d) provides that amounts paid as estimated taxes are considered part payments of the tax imposed by the chapter for the tax year during which the reporting period occurs. Idaho Code § 63-3036A(e) clarifies that the estimated payment obligation does not relieve any person from the obligation to file a return under the chapter at the time the return is due.

Source: Idaho Code § 63-3036A; Idaho Code § 63-3046A; Idaho State Tax Commission, Form 41EST Instructions; Idaho State Tax Commission, Income Tax for Corporations

Idaho corporate taxable income begins with federal taxable income and is modified by specific additions and subtractions set forth in Idaho Code § 63-3022 and related code sections 63-3022A through 63-3022U. Idaho Code § 63-3022 states that "the additions and subtractions set forth in this section, and in sections 63-3022A through 63-3022U, Idaho Code, are to be applied to the extent allowed in computing Idaho taxable income." This section describes the principal corporate modifications; individual-specific modifications (such as college savings plan contributions, military pay, and Idaho lottery prizes) are not covered here.

Principal additions

Corporations must add back the following items to federal taxable income:

State and local income taxes. Idaho Code § 63-3022(a) requires taxpayers to "add any state and local taxes, as defined in section 164 of the Internal Revenue Code that are measured by net income, or for which a credit is allowable under section 63-3029, Idaho Code, and paid or accrued during the taxable year adjusted for state or local tax refunds used in arriving at taxable income." This reverses the federal deduction for state and local income taxes. Line 13 of Form 41 implements this addition. The statute does not require an addback for federal income taxes paid; federal income taxes remain deductible for Idaho purposes.

Net operating loss deduction. Idaho Code § 63-3022(b) requires taxpayers to "add the net operating loss deduction used in arriving at taxable income." The federal NOL deduction is added back because Idaho applies its own net operating loss rules under subsection (c). Line 14 of Form 41 implements this addition.

Dividends-received deduction. Idaho Code § 63-3022(d) requires that "in the case of a corporation, add the amount deducted under the provisions of sections 243(a) and (c), 244, 245, and 246A of the Internal Revenue Code (relating to dividends received by corporations and other special deductions) as limited by section 246(b)(1) of said code." The federal dividends-received deduction claimed on the federal return must be added back to federal taxable income. Line 15 of Idaho Form 41 implements this addition.

Interest and dividends from non-federal tax-exempt securities. Idaho Code § 63-3022M(1) requires taxpayers to "add interest and dividends received or accrued during the taxable year from foreign securities and from securities issued by states and other political subdivisions exempt from federal income tax under the Internal Revenue Code, less applicable amortization." This addition taxes income from out-of-state municipal bonds that is exempt from federal tax but not from Idaho tax. Line 12 of Form 41 implements this addition.

Excess business losses under IRC § 461(l). Idaho Code § 63-3022(r) requires taxpayers to "add the excess business losses under section 461(l) of the Internal Revenue Code, as required by section 63-3004, Idaho Code." The statute provides that these losses "may be carried forward and deducted as an Idaho net operating loss under section 63-3021, Idaho Code, successively over the next twenty (20) years succeeding the taxable year in which the loss arises until such losses are exhausted. Excess business losses shall not be carried back."

Bonus depreciation. Idaho Code § 63-3022O addresses the special first-year depreciation allowance under IRC § 168(k). For property acquired before 2008 or after 2009, the statute requires that "the adjusted basis of that property and the depreciation deduction allowed for Idaho income tax purposes must be computed without regard to the special first-year depreciation allowance." This creates an addition in the year bonus depreciation is claimed and a subtraction in later years when Idaho depreciation exceeds federal depreciation. "The adjustments required by this subsection do not apply to property acquired after 2007 and before 2010." Line 16 of Form 41 requires a bonus depreciation schedule.

Principal subtractions

Corporations may subtract the following items from federal taxable income:

IRC § 78 gross-up for foreign dividends. Idaho Code § 63-3022(e) provides that "in the case of a corporation, subtract an amount determined under section 78 of the Internal Revenue Code to be taxable as dividends." IRC § 78 requires U.S. corporations to include deemed-paid foreign taxes in income when claiming a foreign tax credit; Idaho subtracts this gross-up amount, effectively reversing the federal inclusion. Line 19 of Idaho Form 41 instructs taxpayers to "enter the foreign dividend gross-up as provided by IRC Section 78 included in federal taxable income."

Interest from U.S. government obligations. Idaho Code § 63-3022M(3)(a) provides that taxpayers may "subtract interest and dividends received or accrued during the taxable year from securities issued: (a) By the federal government and its instrumentalities to the extent included in taxable income and not subject to taxation by this state." Line 21 of Form 41 instructs taxpayers to deduct interest on U.S. government obligations included in federal taxable income.

Interest from Idaho municipal securities. Idaho Code § 63-3022M(3)(b) provides that taxpayers may subtract interest and dividends received or accrued during the taxable year from securities issued "by the state of Idaho, its cities and political subdivisions, exempt from federal income tax under the Internal Revenue Code." Line 20 of Form 41 implements this subtraction.

Expenses and interest related to tax-exempt income — limited subtraction and addback. Idaho Code § 63-3022M(2) allows taxpayers to "subtract any expenses and interest not allowed under sections 265 and 291 of the Internal Revenue Code in computing taxable income, as defined in section 63-3011B, Idaho Code, for interest on indebtedness incurred or continued to purchase or to carry obligations the interest of which is not subject to the taxes imposed under the Internal Revenue Code." However, Idaho Code § 63-3022M(4) imposes its own interest expense disallowance: "No deduction shall be allowed for interest on indebtedness incurred or continued to purchase or to carry obligations the interest of which is not subject to the taxes imposed under this chapter." The disallowed interest "bears the same ratio to the aggregate amount allowable to the taxpayer as a deduction for interest for the taxable year as the taxpayer's interest income from the obligations mentioned in the preceding sentence bears to the taxpayer's total income for the taxable year." The subtraction under subsection (2) "shall not exceed the amount of interest and dividend income added pursuant to subsection (1) of this section less interest and dividend income from the state of Idaho, its cities and political subdivisions, subtracted pursuant to subsection (3) of this section." Lines 22 and 23 of Form 41 implement these adjustments.

Income exempt from Idaho taxation. Idaho Code § 63-3022(f) provides that taxpayers may "subtract the amount of any income received or accrued during the taxable year that is exempt from taxation by this state, under the provisions of any other law of this state or a law of the United States, if not previously subtracted in arriving at taxable income."

Idaho net operating loss. Idaho Code § 63-3022(c)(1) provides that "a net operating loss for any taxable year commencing on and after January 1, 2000, but before January 1, 2013, shall be a net operating loss carryback not to exceed a total of one hundred thousand dollars ($100,000) to the two (2) immediately preceding taxable years." Any unused portion may be carried forward for 20 years. The taxpayer may elect to forgo the carryback. For taxable years commencing on or after January 1, 2013, the statute was amended to eliminate the carryback. Subsection (c)(4) provides that "net operating losses incurred by a corporation during a year in which such corporation did not transact business in Idaho or was not included in a group of corporations combined under section 63-3027(22), Idaho Code, may not be subtracted."

COVID-19 relief exclusions. Idaho Code § 63-3022(s) provides that taxpayers may "subtract any amounts included in taxable income for funds received or loans forgiven pursuant to the provisions of the coronavirus aid, relief, and economic security act, P.L. 116-136." Conversely, Idaho Code § 63-3022(u) requires taxpayers to "add any amounts excluded from taxable income for funds received pursuant to the emergency rental assistance program established by section 501 of division N of the consolidated appropriations act, 2021, P.L. 116-260." The CARES Act subtraction decouples Idaho from federal taxation of PPP loan forgiveness and certain grants; the rental assistance addition prevents a double benefit.

Related-party expense addbacks

Idaho does not have a statutory addback requirement for intangible expenses, interest, or management fees paid to related entities in low-tax jurisdictions. Many states impose such addbacks to prevent base erosion through related-party payments, but Idaho Code § 63-3022 and related sections do not contain a provision comparable to the related-party addback statutes found in states like Alabama, Massachusetts, or North Carolina. Corporations are not required to add back royalties, interest, or intangible expenses paid to affiliates solely because the payments are to related parties. However, Idaho's combined reporting regime under Idaho Code § 63-3027(22) may include such related entities in the combined group, thereby eliminating intercompany transactions and achieving a similar substantive result.

Source: Idaho Code § 63-3022; Idaho Code § 63-3022M; Idaho Code § 63-3022O; Idaho State Tax Commission, Form 41 Corporation Income Tax Return and Instructions

Idaho provides an automatic six-month extension of time to file corporate income tax returns under Idaho Code § 63-3033(a). The extension is automatic in the sense that no state extension form is required and no written application must be submitted to the Idaho State Tax Commission. However, the extension is conditional: it is valid only if the taxpayer meets the payment threshold on or before the original due date.

Payment threshold for a valid extension

Under Idaho Code § 63-3033(a), taxpayers receive the automatic six-month extension if, on or before the unextended due date, the taxpayer has paid at least 80% of the total tax due on the income tax return when it is filed, or has paid the total tax due on the income tax return for the prior year (if a return was filed for the prior year). This creates a dual safe harbor: a corporation may satisfy the payment threshold by paying either (1) 80% of its current-year liability, or (2) 100% of its prior-year liability.

The 100% prior-year safe harbor is especially useful when a corporation expects its current-year liability to be substantially higher than the prior year. A corporation that pays 100% of the prior year's tax by the original due date qualifies for the extension even if its current-year liability turns out to be significantly larger. Conversely, a corporation that underpaid in the prior year may use the 80% threshold to satisfy the extension payment requirement by estimating and paying 80% of the current year's tax.

De minimis exception

Idaho Code § 63-3033(b) provides that if, after consideration of any previous credits or payments applicable to the return, the payment required to meet the provisions of subsection (a) is $50 or less on the unextended due date, such payment is not required in order to qualify for the extension. This means a corporation that owes $50 or less does not need to make a payment to receive the extension. However, interest will still accrue on any unpaid balance from the original due date under Idaho Code § 63-3033(g).

Length of the extension

The extension period is six months from the original due date. For a calendar-year C corporation, the original due date is April 15 (the 15th day of the fourth month following the close of the taxable year under Idaho Code § 63-3032), so the extended due date is October 15. The Idaho State Tax Commission's extension guidance confirms that corporations can file income tax returns up to six months from the original due date with a valid extension.

No separate extension form required

Idaho does not require corporations to file a separate state extension form (such as a Form 41ES or a written extension request) to obtain the extension. If the corporation has satisfied the payment threshold, the extension is automatic. The Idaho State Tax Commission's extension page states that "if you don't need to make a payment, you don't have to send us Form 51 or Form 41ES." (Form 51 is the individual extension payment form; Form 41ES is the corporate estimated tax voucher sometimes used for extension payments.) If a payment is required, the corporation may submit the payment using the Tax Commission's online QuickPay service or by mailing a check with a payment voucher, but no formal extension application is required.

Extension to file, not to pay

The six-month extension is an extension of the time to file the return, not an extension of the time to pay the tax. Idaho Code § 63-3033(g) provides that "in all cases of an extension of time in which to file any return … interest shall be paid on any tax due from the original due date to date of payment at the rate provided in section 63-3045, Idaho Code." This means that any unpaid tax accrues interest from the original due date (April 15 for calendar-year filers) through the date of payment, even if the return is timely filed under the extension. The tax is due on the original due date; only the filing deadline is extended.

Idaho Code § 63-3033(f) further provides that if the payment made under subsection (a) is less than 80% of the total tax due and also less than the total tax due on the prior year's return (except as permitted by the $50 de minimis exception), a penalty may be applied to the balance due unless reasonable cause can be established. This penalty provision reinforces that the extension is contingent on meeting the payment threshold; failure to pay enough by the original due date not only subjects the taxpayer to interest but may also trigger a penalty.

Penalty for late filing

If a corporation does not meet the payment threshold and therefore does not have a valid extension, the return is considered late if filed after the original due date. Idaho Code § 63-3046(c)(1) imposes a late-filing penalty of 5% of the tax due on the return for each month (or part of a month) after the due date (including extensions), up to a maximum of 25%. Idaho Code § 63-3046(f) sets a minimum penalty of $10. A valid extension avoids the late-filing penalty for the six-month extension period, but only if the payment threshold is satisfied.

Relation to federal extension

Idaho's automatic extension is a state-level extension. A corporation that has obtained a federal extension by filing IRS Form 7004 is not automatically entitled to an Idaho extension unless it also satisfies Idaho's payment threshold under Idaho Code § 63-3033(a). However, as a practical matter, many corporations that have satisfied the federal extension payment requirement (under IRC § 6655) will also satisfy Idaho's 80% or 100% payment threshold, especially if the corporation's Idaho tax is a function of its federal taxable income.

Source: Idaho Code § 63-3033; Idaho Code § 63-3032; Idaho Code § 63-3046; Idaho State Tax Commission, Extensions