42: Apportionment and Combined Reporting Adjustments and Instructions 2024 (2024)
Idaho · Idaho Tax Commission · Used for tax years 2024
Idaho Form 42 calculates the Idaho apportionment factor for business income and reports worldwide or water’s-edge adjustments to combined income. It reports property, sales, and payroll amounts, along with additions and subtractions for combined reporting, and is included with th
Who files this form
For tax year 2024, Form 42 has two parts:
- Part I, Apportionment Formula: Used by taxpayers with income from business activity taxable in Idaho and another state or country.
- Part II, Combined Reporting Adjustments: Used by a corporation that owns an interest in at least one foreign affiliate. Partnerships don’t use Part II.
If you’re a partner in a partnership or a shareholder in an S corporation, you must consider that entity’s activity when deciding whether your business income is taxable in Idaho and another state or country. Include your share of its property, payroll, and sales from Form ID K-1.
What you'll need
Have the information and supporting schedules that apply to your filing:
- Business identification: Name as shown on the return and federal Employer Identification Number (EIN).
- Property figures: Beginning- and end-of-year inventories and real and tangible personal property at original cost, plus rents paid, for both total and Idaho amounts.
- Sales and payroll figures: Gross receipts, Idaho sales, throwback sales, and total and Idaho wages and salaries.
- Form ID K-1: Your share of pass-through entity property, payroll, and sales, if applicable.
- Part I attachments: A detailed schedule for other business gross receipts on line 14; apportionment detail by company for a unitary group; and a list of companies using three-factor apportionment, if applicable.
For Part II, the instructions call for supporting schedules for applicable foreign affiliate income, book-to-tax adjustments, subsidiary income or loss, intercompany transactions, and miscellaneous additions or deductions. Line 3 also calls for copies of the applicable foreign corporations’ federal income tax returns. For line 9, include a schedule identifying dividend payors, payees, and amounts regardless of filing method.
How to file
Include Form 42 with your Idaho Income Tax Return as page 3.
Complete all three sections of Part I: property, sales, and payroll. Compute percentages to four decimal places. If using three-factor apportionment, check the box and provide a list of the companies using that method.
If Part II applies, enter total additions from line 6 on Form 41, line 17, and total subtractions from line 12 on Form 41, line 29. Include the required supporting schedules.
The supplied text does not give a mailing address or e-file directions.
Common mistakes
- Leaving property or payroll blank because you use the single sales factor. All taxpayers must complete all three sections of Part I, even though only three-factor taxpayers use all three factors in the calculation.
- Using the wrong precision. Compute all percentages to four decimal places.
- Forgetting pass-through activity. Include your share of property, payroll, and sales from Form ID K-1.
- Using Part II, line 1 as a water’s-edge filer. The instructions say to skip that line and go to line 2.
- Claiming a dividend subtraction twice. Part II, line 9 is for intercompany dividends that haven’t been subtracted elsewhere on Form 42 or Form 41.
- Including actual possession-corporation dividends on line 8a. The instructions specifically say not to include those dividends there.
Questions people ask
What is the default apportionment method?
Single sales factor is the default. For this method, use the sales percentage from line 16 on line 20, then use the line 20 percentage on line 21.
Who can elect three-factor apportionment?
Electrical, telephone, and communications corporations as defined in Idaho Code can elect it. So can the listed Multistate Tax Commission special industries: construction contractors, airlines, railroads, trucking companies, television and radio broadcasting, publishing, and financial institutions.
What is an Idaho throwback sale?
The instructions define a throwback sale as a sale made in a state with no jurisdiction to tax the seller. Enter Idaho throwback sales from line 10 on line 12.
What if one of the three factors doesn’t apply to my business?
For three-factor apportionment, divide the total on line 20 by the number of factors used rather than automatically dividing by three. The instructions give the example of a business with no employees anywhere, which reduces the number of factors by one.
What foreign dividend exclusion percentage do water’s-edge filers use?
Enter 80% on Part II, line 8b if you elected to forgo filing the water’s-edge spreadsheets as shown on Form 41, line 8b. Enter 85% if you’re filing the water’s-edge domestic disclosure spreadsheets. This exclusion applies only to water’s-edge filers.