Section 335. Nonapportionable Income (Rule 335)

Section 63-3027(1)(h), Idaho Code 01. Nonapportionable Income. Nonapportionable income is all income other than apportionabl e income. All deductions relating to the production of nonapportionable income is to be allocated with the incom e produced. Any allowable deduction that applies to both apportionable and nonapportionable income of the taxpaye r is to be prorated to those classes of income to determine income subject to tax. When used in these rules, the ter m nonapportionable income includes nonapportionable losses unless the context clearly indicates otherwise. (4-6-23) 02. Offset of Interest Expense Against Nonapportionable Income. Interest on indebtedness incurre d or continued to purchase or to carry investment that generates nonapportionable income is offset against the incom e produced. If the facts do not support such a matching of the interest expense to the nonapportionable income, th e portion of the taxpayer's interest expense that is offset against income from nonapportionable investments is to be an amount that bears the same ratio to the aggregate amount allowable to the taxpayer as a deduction for interest for th e taxable year as the taxpayer's nonapportionable income mentioned in the preceding sentence bears to the taxpayer' s total income for the taxable year. Aggregate amount allowable means the taxpayer's total interest expense deducted i n determining taxable income as defined in Section 63-3011B, Idaho Code, plus interest expense disallowed unde r Sections 265 and 291 of the Internal Revenue Code, plus interest expense from a pass-through entity, plus the interes t expense of a corporation that, pursuant to Sections 63-3027 and 63-3027B through 63-3027E, Idaho Code, i s included in a combined report with the taxpayer for the taxable year. See Rule 115 of these rules for the calculation o f total income. (4-6-23) 03. Allocated to Idaho. Nonapportionable income, net of interest and other related expense offsets , that is attributable to Idaho is allocated to Idaho. (4-6-23) 04

oration that, pursuant to Sections 63-3027 and 63-3027B through 63-3027E, Idaho Code, i s included in a combined report with the taxpayer for the taxable year. See Rule 115 of these rules for the calculation o f total income. (4-6-23) 03. Allocated to Idaho. Nonapportionable income, net of interest and other related expense offsets , that is attributable to Idaho is allocated to Idaho. (4-6-23) 04. Allocated to Other States. Nonapportionable income, together with interest and other relate d expense offsets, is allocated to other states if it is not attributable to Idaho. (4-6-23) 336. APPORTIONABLE AND NONAPPORTIONABLE INCOME: APPLICATION OF DEFINITIONS (RULE 336). Section 63-3027(1)(a), 63-3027(1)(h), Idaho Code 01. In General. The following applies the foregoing principles for purposes of determining whethe r particular income is apportionable or nonapportionable income. (4-6-23) 02. Rent From Real and Tangible Personal Property. Rental income from real and tangible propert y is apportionable income if the property for which the rental income was received is or was used in the taxpayer’ s trade or business and, therefore, is includable in the property factor under Rule 465 of these rules. (4-6-23) 03. Gains or Losses from Sales of Assets. Gain or loss from the sale, exchange or other disposition of real property or of tangible or intangible personal property is apportionable income if the property while owned by the taxpayer was used in, or was otherwise included in the property factor of the taxpayer’s trade or business . However, if the property was used to produce nonapportionable income, the gain or loss is nonapportionable income. (4-6-23) 04. Interest Income

nge or other disposition of real property or of tangible or intangible personal property is apportionable income if the property while owned by the taxpayer was used in, or was otherwise included in the property factor of the taxpayer’s trade or business . However, if the property was used to produce nonapportionable income, the gain or loss is nonapportionable income. (4-6-23) 04. Interest Income. Interest income from an intangible is apportionable income if the intangibl e arises out of or was created in the regular course of the taxpayer’s trade or business operations or if the purpose fo r acquiring and holding the intangible is an integral, functional, or operative component of the taxpayer’s trade o r business operations, or otherwise materially contributes to the production of apportionable income of the trade o r business operations. (4-6-23) 05. Dividends. Dividends from stock are apportionable income if the stock arises out of or wa s acquired in the regular course of the taxpayer’s trade or business operations or where the purpose of acquiring and holding the stock is an integral, functional, or operative component of the taxpayer’s trade or business operations, o r otherwise materially contributes to the production of apportionable income of the trade or business operations. (4-6-23) 06. Patent and Copyright Royalties. Royalties from patents and copyrights are apportionable incom e if the patent or copyright arises out of or was created in the regular course of the taxpayer’s trade or busines s operations or if the purpose for acquiring and holding the patent or copyright is an integral, functional, operativ e component of the taxpayer’s trade or business operations, or otherwise materially contributes to the production o f apportionable income of the trade or business operations. (4-6-23) 337. -- 339. (RESERVED) 340. PRINCIPLES FOR DETERMINING THE EXISTENCE OF A UNITARY BUSINESS: UNITARY BUSINESS PRINCIPLE (RULE 340). Section 63-3027, Idaho Code 01. The Concept of a Unitary Business. (4-6-23) a

rativ e component of the taxpayer’s trade or business operations, or otherwise materially contributes to the production o f apportionable income of the trade or business operations. (4-6-23) 337. -- 339. (RESERVED) 340. PRINCIPLES FOR DETERMINING THE EXISTENCE OF A UNITARY BUSINESS: UNITARY BUSINESS PRINCIPLE (RULE 340). Section 63-3027, Idaho Code 01. The Concept of a Unitary Business. (4-6-23) a. A unitary business is a single economic enterprise that is made up either of separate parts of a single business entity or of a commonly controlled group of business entities that are sufficiently interdependent , integrated and interrelated through their activities so as to provide a synergy and mutual benefit that produces a sharing or exchange of value among them and a significant flow of value to the separate parts. This flow of value to a business entity located in Idaho that comes from being part of a unitary business conducted both within and withou t Idaho is what provides the constitutional due process “definite link and minimum connection” necessary for Idaho t o apportion apportionable income of the unitary business, even if that income arises in part from activities conducte d outside Idaho. The apportionable income of the unitary business is then apportioned to Idaho using an apportionment percentage provided by Section 63-3027, Idaho Code. (4-6-23) b. This sharing or exchange of value may also be described as requiring that the operation of one (1) part of the business be dependent upon, or contribute to, the operation of another part of the business. Phrased in th e disjunctive, the foregoing means that if the activities of one (1) business either contribute to the activities of anothe r business or are dependent upon the activities of another business, those businesses are part of a unitary business. (4-6-23) 02. Constitutional Requirement for a Unitary Business. (4-6-23) a

pon, or contribute to, the operation of another part of the business. Phrased in th e disjunctive, the foregoing means that if the activities of one (1) business either contribute to the activities of anothe r business or are dependent upon the activities of another business, those businesses are part of a unitary business. (4-6-23) 02. Constitutional Requirement for a Unitary Business. (4-6-23) a. The sharing or exchange of value described in Subsection 340.01 of this rule that defines the scope of a unitary business requires more than the mere flow of funds arising out of a passive investment or from th e financial strength contributed by a distinct business undertaking that has no operational relationship to the unitar y business. (4-6-23) b. In Idaho, the unitary business principle will be applied to the fullest extent allowed by the U.S . Constitution. The unitary business principle will not be applied to result in the combination of business activities o r entities under circumstances where, if it were adverse to the taxpayer, the combination of such activities or entitie s would not be allowed by the U.S. Constitution. (4-6-23) 03. Separate Trades or Businesses Conducted Within a Single Entity. A single entity may hav e more than one (1) unitary business. In such cases it is necessary to determine the business, or apportionable, incom e attributable to each separate unitary business as well as its nonapportionable income, which is specifically allocated. The apportionable income of each unitary business is then apportioned by a formula that takes into consideration th e in-state and the out-of-state factors that relate to the respective unitary business whose income is being apportioned. (4-6-23) 04. Unitary Business Unaffected by Formal Business Organization. A unitary business may exis t within a single business entity or among a commonly controlled group of business entities

h unitary business is then apportioned by a formula that takes into consideration th e in-state and the out-of-state factors that relate to the respective unitary business whose income is being apportioned. (4-6-23) 04. Unitary Business Unaffected by Formal Business Organization. A unitary business may exis t within a single business entity or among a commonly controlled group of business entities. The relationship is to b e determined by reference to the relationship that exists between all related and affiliated corporations, not just thos e corporations whose income and apportionment factors are required to be considered. For example, the relationship with foreign affiliates is to be considered even though a water’s edge election is made. A related corporation ma y include insurance companies and fifty percent (50%) or less owned corporations. The scope of what is included in a commonly controlled group of business entities is set forth in Rule 344 of these rules. (4-6-23) 341. PRINCIPLES FOR DETERMINING THE EXISTENCE OF A UNITARY BUSINESS: DETERMINATION OF A UNITARY BUSINESS (RULE 341). Section 63-3027, Idaho Code 01. In General. Unity can be established under any one (1) of the judicially acceptable tests (Butle r Brothers, Edison California Stores, Container, etc.), and cannot be denied merely because another of those tests doe s not simultaneously apply. (4-6-23) 02. Significant Flows of Value. A unitary business is characterized by significant flows of valu e evidenced by factors such as those described in Mobil Oil Corp. v. Vermont, 445 U.S. 425 (1980): functiona l integration, centralization of management, and economies of scale. These factors provide evidence of whether th e business activities operate as an integrated whole or exhibit substantial mutual interdependence. Facts suggesting th e presence of the factors mentioned above should be analyzed in combination for their cumulative effect and not i n isolation

Vermont, 445 U.S. 425 (1980): functiona l integration, centralization of management, and economies of scale. These factors provide evidence of whether th e business activities operate as an integrated whole or exhibit substantial mutual interdependence. Facts suggesting th e presence of the factors mentioned above should be analyzed in combination for their cumulative effect and not i n isolation. A particular business operation may be suggestive of one (1) or more of the factors mentioned above. (4-6-23) 342. PRINCIPLES FOR DETERMINING THE EXISTENCE OF A UNITARY BUSINESS: DESCRIPTION AND ILLUSTRATION OF FUNCTIONAL INTEGRATION, CENTRALIZATION OF MANAGEMENT AND ECONOMIES OF SCALE (RULE 342). Section 63-3027, Idaho Code 01. Functional Integration. Functional integration refers to transfers between, or pooling among , business activities that significantly affect the operation of the business activities. Functional integration includes, bu t is not limited to, transfers or pooling with respect to the unitary business’s products or services, technical information , marketing information, distribution systems, purchasing, and intangibles such as patents, trademarks, service marks , copyrights, trade secrets, know-how, formulas, and processes. There is no specific type of functional integration that must be present. The following is a list of examples of business operations that can support the finding of functiona l integration. The order of the list does not establish a hierarchy of importance. (4-6-23) a. Sales, exchanges, or transfers (collectively “sales”) of products, services, or intangibles between business activities provide evidence of functional integration. The significance of the intercompany sales to th e finding of functional integration will be affected by the character of what is sold and the percentage of total sales or purchases represented by the intercompany sales

nce. (4-6-23) a. Sales, exchanges, or transfers (collectively “sales”) of products, services, or intangibles between business activities provide evidence of functional integration. The significance of the intercompany sales to th e finding of functional integration will be affected by the character of what is sold and the percentage of total sales or purchases represented by the intercompany sales. For example, sales among business entities that are part of a vertically integrated unitary business are indicative of functional integration. Functional integration is not negated b y the use of a readily determinable market price to effect the intercompany sales, because such sales can represent a n assured market for the seller or an assured source of supply for the purchaser. (4-6-23) b. Common Marketing. The sharing of common marketing features among business entities is an indication of functional integration when such marketing results in significant mutual advantage. Common marketin g exists when a substantial portion of the business entities’ products, services, or intangibles are distributed or sold to a common customer, when the business entities use a common trade name or other common identification, or when th e business entities seek to identify themselves to their customers as a member of the same enterprise. The use of a common advertising agency or a commonly owned or controlled in-house advertising office does not by itsel f establish common marketing that is suggestive of functional integration. (Such activity, however, is relevant t o determining the existence of economies of scale and centralization of management.) (4-6-23) c. Transfer or Pooling of Technical Information or Intellectual Property

The use of a common advertising agency or a commonly owned or controlled in-house advertising office does not by itsel f establish common marketing that is suggestive of functional integration. (Such activity, however, is relevant t o determining the existence of economies of scale and centralization of management.) (4-6-23) c. Transfer or Pooling of Technical Information or Intellectual Property. Transfers or pooling o f technical information or intellectual property, such as patents, copyrights, trademarks and service marks, trade secrets, processes or formulas, know-how, research, or development, provide evidence of functional integration whe n the matter transferred is significant to the businesses’ operations. (4-6-23) d. Common Distribution System. Use of a common distribution system by the business entities, unde r which inventory control and accounting, storage, trafficking, or transportation are controlled through a commo n network provides evidence of functional integration. (4-6-23) e. Common Purchasing. Common purchasing of substantial quantities of products, services, o r intangibles from the same source by the business entities, particularly where the purchasing results in significant cos t savings or where products, services, or intangibles are not readily available from other sources and are significant to each entity’s operations or sales, provides evidence of functional integration. (4-6-23) f. Common or Intercompany Financing. Significant common or intercompany financing, includin g the guarantee by, or the pledging of the credit of, one (1) or more business entities for the benefit of another busines s entity or entities provides evidence of functional integration, if the financing activity serves an operational purpose o f both borrower and lender. Lending which serves an investment purpose of the lender does not necessarily provid e evidence of functional integration. (See Subsection 342.02 of this rule for discussion of centralization o f management.) (4-6-23) 02

benefit of another busines s entity or entities provides evidence of functional integration, if the financing activity serves an operational purpose o f both borrower and lender. Lending which serves an investment purpose of the lender does not necessarily provid e evidence of functional integration. (See Subsection 342.02 of this rule for discussion of centralization o f management.) (4-6-23) 02. Centralization of Management. Centralization of management exists when directors, officers, o r other management employees jointly participate in the management decisions that affect the respective busines s activities and that may also operate to the benefit of the entire economic enterprise. Centralization of managemen t can exist whether the centralization is effected from a parent entity to a subsidiary entity, from a subsidiary entity to a parent entity, from one (1) subsidiary entity to another, from one (1) division within a single business entity to anothe r division within a business entity, or from any combination of the foregoing. Centralization of management may exis t even when day-to-day management responsibility and accountability has been decentralized, so long as th e management has an ongoing operational role with respect to the business activities. An operational role can b e effected through mandates, consensus building, or an overall operational strategy of the business, or any other mechanism that establishes joint management. (4-6-23) a. Facts Providing Evidence of Centralization of Management. Evidence of centralization o f management is provided when common officers participate in the decisions relating to the business operations of th e different segments. Centralization of management may exist when management shares or applies knowledge and expertise among the parts of the business. Existence of common officers and directors, while relevant to a showing o f centralization of management, does not alone provide evidence of centralization of management

fficers participate in the decisions relating to the business operations of th e different segments. Centralization of management may exist when management shares or applies knowledge and expertise among the parts of the business. Existence of common officers and directors, while relevant to a showing o f centralization of management, does not alone provide evidence of centralization of management. Common officer s are more likely to provide evidence of centralization of management than are common directors. (4-6-23) b. Stewardship Distinguished. Centralized efforts to fulfill stewardship oversight are not evidence o f centralization of management. Stewardship oversight consists of those activities that any owner would take to revie w the performance of or safeguard an investment. Stewardship oversight is distinguished from those activities that a n owner may take to enhance value by integrating one (1) or more significant operating aspects of one (1) busines s activity with the other business activities of the owner. For example, implementing reporting requirements or mer e approval of capital expenditures may evidence only stewardship oversight. (4-6-23) 03. Economies of Scale. Economies of scale refers to a relation among and between business activitie s resulting in a significant decrease in the average per unit cost of operational or administrative functions due to th e increase in operational size. Economies of scale may exist from the inherent cost savings that arise from the presence of functional integration or centralization of management. The following are examples of business operations that can support the finding of economies of scale. The order of the list does not establish a hierarchy of importance. (4-6-23) a. Centralized Purchasing. Centralized purchasing designed to achieve savings due to the volume o f purchases, the timing of purchases, or the interchangeability of purchased items among the parts of the busines s engaging in the purchasing provides evidence of economies of scale

support the finding of economies of scale. The order of the list does not establish a hierarchy of importance. (4-6-23) a. Centralized Purchasing. Centralized purchasing designed to achieve savings due to the volume o f purchases, the timing of purchases, or the interchangeability of purchased items among the parts of the busines s engaging in the purchasing provides evidence of economies of scale. (4-6-23) b. Centralized Administrative Functions. The performance of traditional corporate administrativ e functions, such as legal services, payroll services, pension and other employee benefit administration, in commo n among the parts of the business may result in some degree of economies of scale. A business entity that secure s savings in the performance of corporate administrative services due to its affiliation with other business entities that i t would not otherwise reasonably be able to secure on its own because of its size, financial resources, or available market, provides evidence of economies of scale. (4-6-23) 343. PRINCIPLES FOR DETERMINING THE EXISTENCE OF A UNITARY BUSINESS: INDICATORS OF A UNITARY BUSINESS (RULE 343). Section 63-3027, Idaho Code 01. Same Type of Business. Business activities that are in the same general line of business generally constitute a single unitary business, for example, a multistate grocery chain. (4-6-23) 02. Steps in a Vertical Process. Business activities that are part of different steps in a vertically structured business almost always constitute a single unitary business. For example, a business engaged in th e exploration, development, extraction, and processing of a natural resource and the subsequent sale of a product based upon the extracted natural resource, is engaged in a single unitary business, regardless of the fact that the various steps in the process are operated substantially independently of each other with only general supervision from the business’s executive offices. (4-6-23) 03. Strong Centralized Management

t, extraction, and processing of a natural resource and the subsequent sale of a product based upon the extracted natural resource, is engaged in a single unitary business, regardless of the fact that the various steps in the process are operated substantially independently of each other with only general supervision from the business’s executive offices. (4-6-23) 03. Strong Centralized Management. Business activities that might otherwise be considered as par t of more than one (1) unitary business may constitute one (1) unitary business when there is a strong centralize d management, coupled with the existence of centralized departments for such functions as financing, advertising , research, or purchasing. Strong centralized management exists when a central manager or group of managers makes substantially all of the operational decisions of the business. For example, some businesses conducting diverse line s of business may properly be considered as engaged in only one (1) unitary business when the central executiv e officers are actively involved in the operations of the various business activities and there are centralized offices tha t perform for the business activities the normal matters that a truly independent business would perform for itself, suc h as personnel, purchasing, advertising, or financing. (4-6-23) 344. PRINCIPLES FOR DETERMINING THE EXISTENCE OF A UNITARY BUSINESS: COMMONLY CONTROLLED GROUP OF BUSINESS ENTITIES (RULE 344). Section 63-3027, Idaho Code 01. In General. Separate corporations can be a part of a unitary business only if they are members of a commonly controlled group. (4-6-23) 02. Commonly Controlled Group. A “commonly controlled group” means any of the following: (4-6-23) a. A parent corporation and any one (1) or more corporations or chains of corporations, connecte d through stock ownership (or constructive ownership) with the parent, but only if: (4-6-23) i

orations can be a part of a unitary business only if they are members of a commonly controlled group. (4-6-23) 02. Commonly Controlled Group. A “commonly controlled group” means any of the following: (4-6-23) a. A parent corporation and any one (1) or more corporations or chains of corporations, connecte d through stock ownership (or constructive ownership) with the parent, but only if: (4-6-23) i. The parent owns stock possessing more than fifty percent (50%) of the voting power of a least on e (1) corporation, and, if applicable, (4-6-23) ii. Stock cumulatively possessing more than fifty percent (50%) of the voting power of each of th e corporations, except the parent, is owned by the parent, one (1) or more corporations described in Subparagrap h 344.02.a.i., of this rule, or one (1) or more other corporations that satisfy the conditions of this subparagraph. (4-6-23) b. Any two (2) or more corporations, if stock, possessing more than fifty percent (50%) of the votin g power of the corporations is owned, or constructively owned, by the same person. (4-6-23) c. Any two (2) or more corporations that constitute stapled entities. (4-6-23) i. For purposes of this paragraph, “stapled entities” means any group of two (2) or more corporations if more than fifty percent (50%) of the ownership or beneficial ownership of the stock possessing voting power i n each corporation consists of stapled interests. (4-6-23) ii. Two (2) or more interests are stapled interests if, by reason of form of ownership, restrictions o n transfer, or other terms or conditions, in connection with the transfer of one (1) of the interests the other interest o r interests are also transferred or required to be transferred. (4-6-23) d. Any two (2) or more corporations, if stock possessing more than fifty percent (50%) of the votin g power of the corporations is cumulatively owned (without regard to the constructive ownership rules of Paragrap h 344.05.a., of this rule) by, or for the benefit of, members of the same family

e interests the other interest o r interests are also transferred or required to be transferred. (4-6-23) d. Any two (2) or more corporations, if stock possessing more than fifty percent (50%) of the votin g power of the corporations is cumulatively owned (without regard to the constructive ownership rules of Paragrap h 344.05.a., of this rule) by, or for the benefit of, members of the same family. Members of the same family are limite d to an individual, the individual’s spouse, parents, brothers, sisters, grandparents, children and grandchildren, and thei r respective spouses. (4-6-23) 03. Elections and Terminations. (4-6-23) a. If, in the application of Subsection 344.02 of this rule, a corporation is a member of more than on e (1) commonly controlled group of corporations, the corporation elects to be treated as a member of only th e commonly controlled group (or part thereof) with respect to which it has a unitary business relationship. If th e corporation has a unitary business relationship with more than one (1) of those groups, it elects to be treated as a member of only one (1) of the commonly controlled groups with respect to which it has a unitary busines s relationship. This election remains in effect until the unitary business relationship between the corporation and th e rest of the members of its elected commonly controlled group is discontinued, or unless revoked with the approval o f the State Tax Commission. (4-6-23) b. Membership in a commonly controlled group is to be treated as terminated in any year, or fractio n thereof, in which the conditions of Subsection 344.02 of this rule are not met, except as follows: (4-6-23) i. When stock of a corporation is sold, exchanged, or otherwise disposed of, the membership of a corporation in a commonly controlled group will not be terminated, if the requirements of Subsection 344.02 of thi s rule are again met immediately after the sale, exchange, or disposition. (4-6-23) ii

f, in which the conditions of Subsection 344.02 of this rule are not met, except as follows: (4-6-23) i. When stock of a corporation is sold, exchanged, or otherwise disposed of, the membership of a corporation in a commonly controlled group will not be terminated, if the requirements of Subsection 344.02 of thi s rule are again met immediately after the sale, exchange, or disposition. (4-6-23) ii. The State Tax Commission may treat the commonly controlled group as remaining in place if th e conditions of Subsection 344.02 of this rule are again met within a period not to exceed two (2) years. (4-6-23) 04. Controlled. A taxpayer may exclude some or all corporations included in a “commonly controlle d group” by reason of Paragraph 344.02.d., of this rule by showing that those members of the group are not controlle d directly or indirectly by the same interest, within the meaning of the same phrase in Section 482 of the Interna l Revenue Code. For purposes of this subsection, the term “controlled” includes any kind of control, direct or indirect , whether legally enforceable, and however exercisable or exercised. (4-6-23) 05. Stock Ownership. Except as otherwise provided, stock is “owned” when title to the stock i s directly held or if the stock is constructively owned. (4-6-23) a. An individual constructively owns stock that is owned by any of the following: (4-6-23) i. The individual’s spouse. (4-6-23) ii. Children, including adopted children, of that individual or the individual’s spouse, who have no t attained the age of twenty-one (21) years. (4-6-23) iii. An estate or trust, of which the individual is an executor, trustee, or grantor, to the extent that th e estate or trust is for the benefit of that individual’s spouse or children. (4-6-23) b. Stock owned by a corporation, or a member of a controlled group of which the corporation is th e parent corporation, is constructively owned by any shareholder owning stock that represents more than fifty percen t (50%) of the voting power of the corporation

xecutor, trustee, or grantor, to the extent that th e estate or trust is for the benefit of that individual’s spouse or children. (4-6-23) b. Stock owned by a corporation, or a member of a controlled group of which the corporation is th e parent corporation, is constructively owned by any shareholder owning stock that represents more than fifty percen t (50%) of the voting power of the corporation. (4-6-23) c. In the application of Paragraph 344.02.d., of this rule, (dealing with stock possessing voting powe r held by members of the same family), if more than fifty percent (50%) of the stock possessing voting power of a corporation is, in the aggregate, owned by or for the benefit of members of the same family, stock owned by tha t corporation is to be treated as constructively owned by members of that family in the same ratio as the proportion o f their respective ownership of stock possessing voting power in that corporation to all of such stock of tha t corporation. (4-6-23) d. Except as otherwise provided, stock owned by a partnership is constructively owned by an y partner, other than a limited partner, in proportion to the partner’s capital interest in the partnership. For this purpose , a partnership is treated as owning proportionately the stock owned by any other partnership in which it has a tiere d interest, other than as a limited partner. (4-6-23) e. In any case where a member of a commonly controlled group, or shareholders, officers, directors , or employees of a member of a commonly controlled group, is a general partner in a limited partnership, stock hel d by the limited partnership is constructively owned by a limited partner to the extent of its capital interest in th e limited partnership. (4-6-23) f

an as a limited partner. (4-6-23) e. In any case where a member of a commonly controlled group, or shareholders, officers, directors , or employees of a member of a commonly controlled group, is a general partner in a limited partnership, stock hel d by the limited partnership is constructively owned by a limited partner to the extent of its capital interest in th e limited partnership. (4-6-23) f. In the application of Paragraph 344.02.d., of this rule (dealing with stock possessing voting powe r held by members of the same family), stock held by a limited partnership is constructively owned by a limited partne r to the extent of the limited partner’s capital interest in the limited partnership. (4-6-23) 06. Terms. For purposes of the definition of a commonly controlled group, each of the followin g applies: (4-6-23) a. “Corporation” means a corporation as defined in Section 63-3006, Idaho Code. (4-6-23) b. “Person” means a person as defined in Section 63-3005, Idaho Code. (4-6-23) c. “Voting power” means the power of all classes of stock entitled to vote that possess the power t o elect the membership of the board of directors of the corporation. (4-6-23) d. “More than fifty percent (50%) of the voting power” means voting power sufficient to elect a majority of the membership of the board of directors of the corporation. (4-6-23) e. “Stock possessing voting power” includes stock where ownership is retained but the actual votin g power is transferred in either of the following manners: (4-6-23) i. For one (1) year or less. (4-6-23) ii. By proxy, voting trust, written shareholder agreement, or by similar device, where the transfer is revocable by the transferor. (4-6-23) f. In the case of an entity treated as a corporation under Paragraph 344.06.a., of this rule, “stoc k possessing voting power” refers to an instrument, contract, or similar document demonstrating an ownership interes t in that entity that confers power in the owner to cast a vote in the selection of the management of that entity.(4-6-23) 345

re the transfer is revocable by the transferor. (4-6-23) f. In the case of an entity treated as a corporation under Paragraph 344.06.a., of this rule, “stoc k possessing voting power” refers to an instrument, contract, or similar document demonstrating an ownership interes t in that entity that confers power in the owner to cast a vote in the selection of the management of that entity.(4-6-23) 345. -- 349. (RESERVED)