If Congress reinstates a federal tax deduction retroactively after Idaho's annual federal-conformity bill is already signed, can Idaho taxpayers use the new deduction on their Idaho state return, or do they have to wait for the legislature to update Idaho law?

Plain-English summary

Tax Commission Chairman Mike Southcombe asked the AG a precise question with a sticky timing twist. On April 11, 1995, President Clinton signed the federal Self-Employed Health Insurance Act (Pub. L. 104-7), which reinstated retroactively to January 1, 1994, the federal deduction allowing sole proprietors and partners to deduct 25 percent of their health-insurance premiums for themselves, their spouses, and dependents. The retroactive effective date was deliberate: it meant federal taxpayers who had already filed 1994 returns could file an amendment and claim the deduction. The question for Idaho was whether Idaho's piggyback income tax automatically picked up the change for 1994 Idaho returns too.

Deputy AG Ted Spangler, writing for AG Alan Lance, said no. Idaho Code § 63-3004 (the federal-conformity statute) defines the "Internal Revenue Code" for Idaho purposes as the federal IRC "as amended, and in effect on the first day of January, 1995." The latest amendment to § 63-3004 was 1995 Idaho Session Laws chapter 79, § 1 (H.B. 117), signed by Governor Phil Batt on March 10, 1995, with a January 1, 1995, effective date. Both dates predated President Clinton's April 11 signature on Pub. L. 104-7. So under § 63-3004's reach-back rule, only IRC amendments enacted before Idaho's last conformity bill came into Idaho law. The federal Self-Employed Health Insurance Act was not yet part of Idaho law and could not be claimed on a 1994 Idaho return without further legislative action.

The opinion also fielded a constitutional question: was the timing rule itself a problem? No. The reason Idaho's conformity statute is structured to incorporate the IRC only as it existed on a fixed date is to avoid an unconstitutional delegation of state legislative power to Congress. Idaho Savings and Loan Association v. Roden, 82 Idaho 128, 350 P.2d 255 (1960), struck down a state statute that required Idaho savings and loans to insure their accounts with FSLIC and conform to federal regulations going forward, on the ground that it impermissibly delegated future Idaho law-making to the federal government. The AG's broader rule, drawn from State v. Nelson, Kerner v. Johnson, and the rest of the line: Idaho can incorporate existing federal provisions, but cannot adopt federal provisions that have not yet been written. Annual federal-conformity bills are how Idaho stays current without violating the non-delegation doctrine.

Currency note

This opinion was issued in 1995. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Why doesn't Idaho just track federal law as it changes?

Because Idaho's constitution forbids delegating Idaho law-making to Congress. The Roden case (1960) struck down a statute that required Idaho savings and loans to follow whatever the National Housing Act and FSLIC said, both then and in the future. The court said all legislative power for Idaho is vested in the Idaho Legislature, and the legislature cannot offload future law-making to a federal agency. The fix, used in Idaho Code § 63-3004 and similar statutes, is to incorporate federal law as it exists on a fixed date, then update the fixed date each year. That preserves uniformity with federal tax in most cases without giving Congress carte blanche over Idaho law.

What happens to federal mid-year changes that the legislature hasn't picked up?

Until the next conformity bill, they don't apply for Idaho purposes. So a self-employed Idahoan in spring 1995 who claimed the new health-insurance deduction on their 1994 federal return could not claim the same deduction on their Idaho return. They had to compute Idaho taxable income using the IRC as it stood on January 1, 1995 (without the new deduction), and pay Idaho tax accordingly. If the next year's conformity bill picked up the change retroactively, an amended Idaho return might recover the difference, but at the time of this opinion that was hypothetical.

Could the legislature adopt the change retroactively?

The opinion noted that Idaho retroactive tax legislation is sometimes constitutional, citing AG Opinion 91-2 for a fuller treatment. The constitutional questions around retroactive tax laws turn on due process and the legislature's articulated reasons for the retroactivity. Mid-cycle adoption of a beneficial federal change (a new deduction, lower rate, or expanded credit) is generally easier to defend than a retroactive tax increase.

How does this affect tax preparers and self-employed people?

For 1994 Idaho returns, self-employed Idahoans had to add back the federal health-insurance deduction when computing Idaho taxable income, even if they took the deduction federally. For preparers, the lesson is that piggyback isn't automatic; the date in § 63-3004 controls. Watching mid-year federal tax changes for Idaho impact required a separate question: did the change post-date the most recent Idaho conformity bill? If so, treat the change as not yet effective in Idaho.

Did this opinion address whether the legislature should have adopted the change?

No. The AG limited itself to a legal question: under existing Idaho law as of April 1995, did self-employed Idahoans get the federal deduction on their 1994 Idaho returns? The answer was no. Whether the legislature should retroactively adopt the change in 1996 or refund taxes paid was a policy choice for the legislature, not the AG.

Background and statutory framework

Idaho is a "rolling conformity" state for income tax with a fixed date. Idaho Code § 63-3022 defines "taxable income" by referring to the federal IRC § 63 definition, "adjusted as provided in this chapter." Idaho Code § 63-3004 then defines "Internal Revenue Code" as the federal IRC of 1986, "as amended, and in effect on" a specific date. The legislature updates the date each year through a conformity bill, usually early in the legislative session. In 1995, House Bill 117 set the date at January 1, 1995, and Governor Batt signed it on March 10, 1995, with an effective date of January 1, 1995.

Subsection (b) of § 63-3004 picks up retroactive provisions of federal amendments, but only if those amendments were enacted before the latest amendment to § 63-3004. So a retroactive federal change made before March 10, 1995, would carry through to Idaho. A retroactive federal change made after that date would not, until and unless the next conformity bill picked it up.

The Self-Employed Health Insurance Act (Pub. L. 104-7) was a quick congressional fix to a problem caused by the 1993 expiration of an earlier deduction provision. Federal taxpayers who had filed 1994 returns without the deduction (because it had expired) could now amend their federal returns. Idaho self-employed taxpayers had to wait, and if the legislature didn't pick the change up, they were out of pocket for state-tax purposes on the same 1994 health-insurance premiums.

Citations

• Idaho Code §§ 63-3004, 63-3022
• 1995 Idaho Session Laws ch. 79, § 1 (H.B. 117)
• Self-Employed Health Insurance Act, Pub. L. No. 104-7 (1995)
• Idaho Savings & Loan Association v. Roden, 82 Idaho 128, 350 P.2d 255 (1960)
• State v. Nelson, 36 Idaho 713, 213 P. 358 (1923); State v. Heitz, 72 Idaho 107, 238 P.2d 439 (1951); State v. Kellogg, 98 Idaho 541, 568 P.2d 514 (1977); Kerner v. Johnson, 99 Idaho 433, 583 P.2d 360 (1978)
• Board of County Commissioners v. Idaho Health Facilities Authority, 96 Idaho 498, 531 P.2d 588 (1975)
• Boise Redevelopment Agency v. Yick Kong Corp., 94 Idaho 876, 499 P.2d 575 (1972)
• Idaho AG Opinion 91-2 (1991 Idaho Att'y Gen. Ann. Rpt. 21)

Source

• Landing page: https://www.ag.idaho.gov/office-resources/opinions/
• Original PDF: https://ag.idaho.gov/content/uploads/2018/04/OP95-02.pdf

Original opinion text

ATTORNEY GENERAL OPINION NO. 95-02
TO:

R. Michael Southcombe, Chairman
Idaho State Tax Commission
STATEHOUSE MAIL
Per Request for Attorney General’s Opinion

Dear Mr. Southcombe:
QUESTION PRESENTED
Does passage of Pub. L. No. 104-7, the Self-Employed Health Insurance Act,
which was signed into law by President Clinton on April 11, 1995, apply retroactively to
the benefit of Idaho taxpayers on their Idaho income taxes for 1994?
SHORT ANSWER
No. The provisions of the Self-Employed Health Insurance Act apply retroactively
for 1994 federal tax returns, but not for 1994 Idaho tax returns. Unless the Idaho
Legislature acts affirmatively to incorporate this recent change in federal tax law
retroactively into Idaho law, self-employed Idaho taxpayers cannot avail themselves of
this tax deduction on their Idaho tax returns for the 1994 tax year.
A.

Background

The “Self-Employed Health Insurance Act” (Pub. L. No. 104-7) amends section
162 of the Internal Revenue Code to reinstate as a deductible business expense certain
health care costs incurred by self-employed individuals (sole proprietors and members of
partnerships). Prior to December 31, 1993, self-employed individuals could deduct
twenty-five percent of the amount paid for health insurance for the individual and the
individual’s spouse and dependents. This deduction expired on December 31, 1993, and
has not been a deduction available for computing federal taxable income for tax years
beginning on and after January 1, 1994. Pub. L. No. 104-7 reinstates this deduction
retroactively to January 1, 1994, and increases the amount of the deduction from twentyfive to thirty percent for tax years beginning on and after January 1, 1995. President
Clinton signed the bill into law on April 11, 1995.
To take advantage of this deduction, federal taxpayers who have already filed
1994 returns will be required to file amendments to their 1994 federal income tax returns.

B.

Application of Pub. L. No. 104-7 to the State of Idaho

The Idaho Income Tax Act (chapter 30, title 63, Idaho Code) defines “taxable
income” by incorporating the definitions found in the Internal Revenue Code, subject to
certain modifications. Idaho Code § 63-3022 provides in pertinent part:
The term “taxable income” means “taxable income” as
defined in section 63 of the Internal Revenue Code, adjusted as
provided in this chapter, . . . .
Idaho Code § 63-3004, as most recently amended by 1995 Idaho Session Laws,
chapter 79, § 1 (H.B. 117) defines the term “Internal Revenue Code” as follows:
(a)
The term “Internal Revenue Code” means the Internal
Revenue Code of 1986 of the United States, as amended, and in
effect on the first day of January, 1995.
(b)
Provisions of the Internal Revenue Code amended,
deleted, or added prior to the effective date of the latest amendment
to this section shall be applicable for Idaho income tax purposes on
the effective date provided for such amendments, deletions, or
additions, including retroactive provisions.
The Internal Revenue Code “as amended, and in effect on the first day of January,
1995” did not permit a deduction for health care costs incurred by self-employed
individuals. Subsection (b) of Idaho Code § 63-3004 recognizes, for Idaho income tax
purposes, retroactive effective dates of amendments to the Internal Revenue Code, but
only if the amendment to the Internal Revenue Code is “prior to the effective date of the
latest amendment to this section.” The latest amendment to Idaho Code § 63-3004 was
by H.B. 117 of the 1995 Idaho Legislature. That bill, now 1995 Idaho Session Laws,
chapter 79, § 1, was signed into law by Governor Batt on March 10, 1995. Its effective
date was January 1, 1995. Both dates are before President Clinton’s signature of Pub. L.
No. 104-7 on April 11, 1995. Thus, the deduction for health care costs incurred by selfemployed individuals in 1994 is not a deduction available for the computation of Idaho
taxes under present Idaho law.
C.

Delegations of Authority

Your request letter also asks about possible constitutional implications of adoption
of Pub. L. No. 104-7 through H.B. 117. Since H.B. 117 does not effect an adoption of
Pub. L. No. 104-7, issues about possible improper delegations of legislative authority do
not arise. It is appropriate to note, however, that part of the reason for annually updating

Idaho Code § 63-3004 is to avoid any possibility of an apparent adoption of federal law
changes that significantly affect state tax policy without legislative approval.
The Idaho Supreme Court has in the past struck down statutes that provide for
similar legislative delegations to Congress. See Idaho Savings and Loan Association v.
Roden, 82 Idaho 128, 350 P.2d 255 (1960). In that case, the Idaho Supreme Court
considered legislative provisions which required Idaho savings and loan associations to
insure their accounts with the Federal Savings and Loan Insurance Corporation in the
State of Idaho. However, to obtain such insurance, savings and loan associations were
required by federal law to abide by and conform with the National Housing Act and any
amendments thereto, and the rules and regulations of the Federal Home Loan Bank
Board. Finding the legislation to be an unconstitutional delegation of legislative power,
the court said:
The legal axiom that all legislative power is vested in the Legislature
of the State of Idaho has been set forth in State v. Nelson, 36 Idaho 713,
213 P. 358 (1923). The legislature cannot delegate its authority to another
government or agency in violation of our Constitution. State v. Nelson,
supra; State v. Heitz, 72 Idaho 107, 238 P.2d 439 (1951).
. . . Thus, it is demonstrated that the unconstitutional provisions
delegating to the Congress and the Home Loan Bank Board the legislative
power and function to make future laws and regulations governing
appellant’s business and its right to remain in business, are not severable
from the provisions requiring appellant to obtain insurance of accounts by
the Federal Savings and Loan Insurance Corporation. The provisions
requiring such insurance are therefore unconstitutional and void.
82 Idaho at 134-35.
The rule which has developed in Idaho regarding delegation to other public bodies
is that delegation is permissible where the legislature establishes the standard or defines
the limits by which rulemaking or fact finding may be judged. However, it is
impermissible for the legislature to delegate to another public body the power to set the
standard itself. The rule has also been analyzed as a distinction between the delegation
of legislative functions and executive functions. See, e.g., Kerner v. Johnson, 99 Idaho
433, 583 P.2d 360 (1978); State v. Kellogg, 98 Idaho 541, 568 P.2d 514 (1977); Board of
County Commissioners v. Idaho Health Facilities Authority, 96 Idaho 498, 531 P.2d 588
(1975); Boise Redevelopment Agency v. Yick Kong Corp., 94 Idaho 876, 499 P.2d 575
(1951).

For this reason, the Idaho Legislature may adopt existing provisions of the Internal
Revenue Code as a part of the Idaho Income Tax Act, but it cannot adopt, as Idaho law,
unknown and unknowable future federal provisions.
Finally, it is important to note that in certain circumstances it is possible for the
Idaho Legislature to validly make retroactive changes to tax statutes. A fuller analysis of
retroactivity of tax legislation is found in Attorney General Opinion 91-2. See 1991 Idaho
Att’y Gen. Ann. Rpt. 21.
AUTHORITIES CONSIDERED
1.

Idaho Code and Session Laws:
Idaho Code § 63-3004.
1995 Idaho Session Laws, chapter 79, § 1.

2.

Idaho Cases:
Board of County Commissioners v. Idaho Health Facilities Authority, 96 Idaho
498, 531 P.2d 588 (1975).
Boise Redevelopment Agency v. Yick Kong Corp., 94 Idaho 876, 499 P.2d 575
(1951).
Idaho Savings & Loan Association v. Roden, 82 Idaho 128, 350 P.2d 255 (1960).
State v. Heitz, 72 Idaho 107, 238 P.2d 439 (1951).
State v. Kellogg, 98 Idaho 541, 568 P.2d 514 (1977).
State v. Nelson, 36 Idaho 713, 213 P. 358 (1923).

3.

Other Authorities:
Attorney General Opinion No. 91-2, 1991 Idaho Att’y Gen. Ann. Rpt. 21.
The Self-Employed Health Insurance Act (Pub. L. No. 104-7).
DATED this 20th day of April, 1995.
ALAN G. LANCE

Attorney General
Analysis by:
TED SPANGLER
Deputy Attorney General
Idaho Tax Commission