Amends, repeals, and adds to existing law to repeal and replace the Idaho Parental Choice Tax Credit and the Idaho Parental Choice Tax Credit Advance Payment Fund.

LEGISLATURE OF THE STATE OF IDAHO Sixty-eighth Legislature Second Regular Session - 2026 IN THE HOUSE OF REPRESENTATIVES HOUSE BILL NO. 590 BY BERCH AN ACT1 RELATING TO TAXATION; REPEALING SECTION 63-3029N, IDAHO CODE, RELATING TO2 THE IDAHO PARENTAL CHOICE TAX CREDIT; AMENDING CHAPTER 30, TITLE 63,3 IDAHO CODE, BY THE ADDITION OF A NEW SECTION 63-3029N, IDAHO CODE, TO4 ESTABLISH PROVISIONS REGARDING THE IDAHO PARENTAL CHOICE TAX CREDIT;5 AMENDING SECTION 67-1230, IDAHO CODE, TO REVISE PROVISIONS REGARDING6 THE IDAHO PARENTAL CHOICE TAX CREDIT ADVANCE PAYMENT FUND; REPEALING7 SECTION 67-1230, IDAHO CODE, RELATING TO THE IDAHO PARENTAL CHOICE TAX8 CREDIT ADVANCE PAYMENT FUND; AMENDING CHAPTER 12, TITLE 67, IDAHO CODE,9 BY THE ADDITION OF A NEW SECTION 67-1230, IDAHO CODE, TO ESTABLISH PRO-10 VISIONS REGARDING THE IDAHO PARENTAL CHOICE TAX CREDIT ADVANCE PAYMENT11 FUND; AND PROVIDING EFFECTIVE DATES.12

Be It Enacted by the Legislature of the State of Idaho:13

SECTION 1. That Section 63-3029N, Idaho Code, be, and the same is hereby14 repealed.15

SECTION 2. That Chapter 30, Title 63, Idaho Code, be, and the same is16 hereby amended by the addition thereto of a NEW SECTION, to be known and des-17 ignated as Section 63-3029N, Idaho Code, and to read as follows:18 63-3029N. IDAHO PARENTAL CHOICE TAX CREDIT. (1) There is hereby estab-19 lished the Idaho parental choice tax credit.20 (2) For the purpose of this section:21 (a) "Academic instruction" means kindergarten through grade 12 in-22 struction that includes, at a minimum, English language arts, mathemat-23 ics, science, and social studies.24 (b) "Eligible student" means:25 (i) A full-time resident of Idaho who is five (5) to eighteen (18)26 years of age; or27 (ii) A child with disabilities requiring ancillary personnel as28 defined in section 33-2001, Idaho Code, who is five (5) to twenty-29 one (21) years of age.30 (c) "Federal poverty level" means the federal poverty guidelines pub-31 lished and updated annually by the United States department of health32 and human services.33 (d) "Nonpublic school" means a private school, microschool, or learn-34 ing pod that provides academic instruction to eligible students, which35 academic instruction may be provided in person, online, virtually, or36 through any combination thereof, and such academic instruction is:37 (i) Provided by an accredited school; or38 (ii) Documented in a portfolio of evidence or learning record that39 indicates the student's growth. Records of the instruction shall40 be retained sufficient to establish that the instruction meets41

2 the requirements of paragraph (a) of this subsection and shall be1 available in the case of any audit by the state tax commission.2 (e) "Parent" means an eligible student's parent, legal guardian, or3 foster parent, if such foster parent is licensed and in good standing4 pursuant to chapter 12, title 39, Idaho Code.5 (f) "Qualified expenses" means kindergarten through grade 12 tuition6 or fees for attending a nonpublic school, tutoring, nationally stan-7 dardized assessments, assessments used to determine college admission,8 advance placement examinations, industry-recognized certification ex-9 ams, and preparatory courses for nationally standardized assessments.10 "Qualified expenses" also means costs for textbooks, curricula used for11 kindergarten through grade 12 academic instruction, and transporta-12 tion costs to and from a facility incurred for the purposes of receiving13 kindergarten through grade 12 academic instruction, including public14 transportation, ridesharing, and the use of privately owned vehicles,15 for which reimbursement shall use the mileage rate applicable to state16 employee travel in effect at the time the travel occurs. "Qualified ex-17 penses" shall not include expenses paid with funds received from a grant18 under section 33-1031, Idaho Code, or reimbursement pursuant to section19 33-4603, Idaho Code.20 (3) The Idaho parental choice tax credit shall be administered as pro-21 vided in this section. For tax year 2028 and subsequent tax years, there22 shall be allowed a refundable tax credit up to five thousand dollars ($5,000)23 per eligible student against the tax imposed by this chapter for any parent:24 (a) Who incurs qualified expenses of up to five thousand dollars25 ($5,000) per eligible student during the tax year, if each eligible26 student is a dependent and is properly claimed on the parent's full-time27 Idaho resident individual income tax return; and28 (b) Who timely and properly files an application.29 (4) The state tax commission shall prescribe forms for the purpose of30 applying for and claiming the credit authorized by this section. The forms31 shall identify the civil and criminal penalties provided in sections 63-304632 and 63-3075, Idaho Code, for providing false and fraudulent tax information33 and shall require the parents to affirm under oath that the information sub-34 mitted in the form is true and accurate. The forms shall also require any35 parent who has previously received a credit authorized by this section to36 certify and attach evidence that the parent completed the satisfaction and37 engagement survey required under subsection (14) of this section. Begin-38 ning in January 2029, and each year thereafter, the application period shall39 open on January 15 and shall remain open for a period of sixty (60) days. The40 state tax commission shall notify parents whether they will receive a credit41 award. Such notification must be within thirty (30) days of the close of the42 application period.43 (5) The state tax commission shall calculate the total amount of cred-44 its claimed in completed applications that qualify under subsection (3) of45 this section. If the total amount does not exceed the annual maximum limit46 provided in subsection (12) of this section, the state tax commission shall47 re-open the application period to receive new applications. Such applica-48 tions shall be accepted until August 15 or until the annual maximum limit is49 reached, whichever is first.50

3 (6) Credits shall be issued on a yearly basis. For applications re-1 ceived in 2029, the state tax commission shall give priority to parents whose2 modified adjusted gross income as indicated on their most recently filed tax3 return does not exceed three hundred percent (300%) of the federal poverty4 level. Starting in the 2030 application period, the state tax commission5 shall give priority status to applications from parents who received a6 credit in the prior year, followed by parents whose taxable income as indi-7 cated on their most recently filed tax return does not exceed three hundred8 percent (300%) of the federal poverty level.9 (7) The refundable tax credit limit under subsection (3) of this sec-10 tion shall be increased to seven thousand five hundred dollars ($7,500) for11 each eligible student up to twenty-one (21) years of age who is also con-12 sidered a child with disabilities requiring ancillary personnel as defined13 in section 33-2001, Idaho Code. Parents claiming an increased credit under14 this subsection shall document the student's diagnosis or other determina-15 tion made by an Idaho licensed health care provider or the student's eligi-16 bility for services under an individualized education program in accordance17 with the federal individuals with disabilities education act.18 (8) The refundable tax credit provided in this section, including the19 advance payment, shall not constitute Idaho taxable income.20 (9) The application forms pursuant to subsection (4) of this section21 shall permit parents to elect a onetime advance payment of the credit for22 each eligible student. When a parent elects to receive an advance payment23 pursuant to this subsection, the credit shall be issued in one (1) install-24 ment, to be paid within sixty (60) days of notifying a parent of such credit25 award but not later than August 30. The state tax commission shall approve26 advance payments only for eligible students whose parents' modified ad-27 justed gross income as indicated on their most recently filed tax return28 does not exceed three hundred percent (300%) of the federal poverty level.29 Advance payments made under this subsection may be spent only on qualified30 expenses for which the parent may claim a credit under the provisions of this31 section. In order to enable parents whose modified adjusted gross income32 does not exceed three hundred percent (300%) of the federal poverty level to33 pay for a student's education, an advance payment that is expended on quali-34 fied expenses for an eligible student may be claimed for such expenditure in35 that year and a parental choice tax credit shall be allowed on a parent's tax36 return for that year, subject to the remaining requirements of this chapter.37 (10) Parents claiming the Idaho parental choice tax credit shall:38 (a) Claim the credit for only qualified expenses incurred on behalf of39 an eligible student;40 (b) Not claim the credit for any semester in which a student was41 enrolled full-time or part-time in a public school, public char-42 ter school, public virtual charter school, public magnet school, or43 part-time public kindergarten.44 (c) Not claim the credit for any tuition or fees related to academic in-45 struction provided by the parent to such parent's eligible student;46 (d) Ensure no other parent claims a credit for an eligible student. In47 the event more than one (1) parent claims a credit under this section for48 the same eligible student in the same year, the provisions of section49

4 63-3029L(2), Idaho Code, shall be used to determine which parent is en-1 titled to receive the credit; and2 (e) Fill out and submit the satisfaction and engagement survey provided3 for in subsection (14) of this section. No parent shall be eligible to4 receive a credit under the provisions of this section in a subsequent5 year if such parent has not submitted such survey for the last year that6 such parent received the credit.7 (11) If the credit exceeds the tax imposed by this chapter, the excess8 credit amount shall be refunded to the taxpayer. The state tax commission9 shall design the tax return forms to account for advance payment of the10 credit when calculating the tax imposed by this chapter.11 (12) The total amount of tax credits authorized for all taxpayers under12 this section shall not exceed fifty million dollars ($50,000,000) each tax13 year. In the event the total amount of claims for tax credits allowed by this14 section exceeds fifty million dollars ($50,000,000), the credits shall be15 allowed in full to parents whose applications were properly and timely filed16 and who have priority status under subsection (6) of this section, followed17 by the remaining parents who filed complete applications on a first-come,18 first-served basis, until the annual maximum limit is reached. The state tax19 commission shall create and maintain a waiting list demonstrating who would20 be eligible on a first-come, first-served basis if the annual maximum limit21 for credits allowed under this section is increased.22 (13)(a) Beginning with the second regular session of the seventieth23 Idaho legislature in 2030, the state tax commission shall provide an24 annual report to the governor, the senate local government and taxation25 committee, the house revenue and taxation committee, and the joint fi-26 nance-appropriations committee that shall include:27 (i) The total amount of tax credits provided each year under this28 section;29 (ii) The number of parents who applied each year for the Idaho30 parental choice tax credit;31 (iii) The amount of the average tax credit allowed;32 (iv) The number of credits distributed to parents with an adjusted33 gross income below three hundred percent (300%) of the federal34 poverty level;35 (v) The number of parents who applied each year for the advance36 payment pursuant to subsection (9) of this section, the number of37 advance payments awarded, and the median amount of the advance38 payments awarded;39 (vi) The geographic area of parents applying for the credit;40 (vii) The number of eligible students on the waiting list for each41 year; and42 (viii) A list of the categories of qualified expenses for which43 recipients used the tax credit, which shall include the dollar44 amounts for each category listed in subsection (2)(f) of this sec-45 tion.46 (b) The report shall not include any personally identifying informa-47 tion of eligible students, their parents, or their households.48 (14) Beginning in 2029, and each year thereafter, the legislative ser-49 vices office shall deliver to each parent who has received a tax credit under50

5 the provisions of this section a parent satisfaction and engagement survey1 to evaluate the performance of the nonpublic school that the eligible stu-2 dent attended. The survey shall include but not be limited to the quality of3 school leadership, school safety, student engagement, quality of academic4 instruction, and quality of learning outcomes. The state tax commission5 shall provide the legislative services office with contact information to6 identify each parent receiving a credit and any other information required7 for the legislative services office to properly deliver the surveys required8 under this subsection, and shall deliver the surveys to the parents no later9 than January 15 each year. Each parent shall complete the survey and submit10 the completed survey to the legislative services office no later than March11 15. Beginning in 2030, the legislative services office shall submit a report12 to the governor, the senate local government and taxation committee, the13 house revenue and taxation committee, and the joint finance-appropriations14 committee that shall include a summary of the survey results.15 (15) Any taxpayer receiving an advance payment or claiming a tax credit16 without submission of a timely and properly prescribed form shall be ineli-17 gible to receive such payment or claim such credit. The state tax commission18 shall deny or recapture credits claimed by a parent for expenditures not au-19 thorized by the provisions of this section. If a parent has received an ad-20 vance payment for an eligible student in a previous year, the parent shall21 not claim the credit for qualified expenses incurred in a year that a stu-22 dent ceases to qualify as an eligible student, except for any portion of the23 credit that exceeds the amount of the advance payment received. If a student24 ceases to qualify as an eligible student and the parent has already received25 the credit for that year, an amount of the credit, not exceeding the amount26 of the advance payment received, shall be repaid to or recovered by the state27 tax commission and deposited into the general fund.28 (16) Parents who claim the credit on a tax return without receiving29 prior approval of an application may not receive a credit, and the state30 shall have no liability to such parent.31 (17) The state tax commission shall, in as close to real time as practi-32 cable, make available on its website the annual maximum limit, the cumula-33 tive amount of credits claimed in applications under this section, and the34 cumulative amount of advance payments issued under this section until the35 annual maximum limit is reached.36 (18) The state tax commission shall also keep records of the total ap-37 plications for credits and total claim of credits that exceed the annual max-38 imum limit.39 (19) The state tax commission shall ensure that parents of eligible40 students receive notice in the application that participation in the program41 is a parental placement under 20 U.S.C. 1412 of the federal individuals with42 disabilities education act, along with an explanation of the rights that43 parentally placed students possess under the federal individuals with dis-44 abilities education act, including eligibility for equitable services, and45 any applicable state laws and regulations.46 (20) The provisions of this section shall not be construed to permit47 any government agency to exercise control or supervision over any nonpublic48 school or to give the state authority to regulate the education of nonpublic49 school students. A nonpublic school that enrolls a student whose parent50

6 directs a refundable tax credit to the school pursuant to this section is not1 an agent of the state or federal government. A nonpublic school shall not2 be required to alter its creed, practices, admissions policy, or curriculum3 in order to accept students whose payment of tuition or fees stems from a4 refundable tax credit under this section.5

SECTION 3. That Section 67-1230, Idaho Code, be, and the same is hereby6 amended to read as follows:7 67-1230. IDAHO PARENTAL CHOICE TAX CREDIT ADVANCE PAYMENT FUND. (1)8 There is hereby established in the state treasury the Idaho parental choice9 tax credit advance payment fund, to be administered by the state tax commis-10 sion.11 (2) Moneys in the fund shall:12 (a) Consist of the following:13 (i) Legislative appropriations and transfers;14 (ii) Donations and contributions made to the fund;15 (iii) Reversions of unused, paid back, or recovered advance pay-16 ment funds; and17 (iv) Interest earned on idle moneys in the fund; and18 (b) Be continuously appropriated to pay advance payments awarded un-19 der the Idaho parental choice tax credit program established in section20 63-3029N, Idaho Code.21 (3) Notwithstanding any provision of law to the contrary, the state22 controller shall transfer the unobligated cash balance remaining in the23 fund, established pursuant to this section, to the general fund. Such trans-24 fer shall occur on July 1, 2027, or as soon thereafter as practicable but no25 later than December 1, 2027.26

SECTION 4. That Section 67-1230, Idaho Code, be, and the same is hereby27 repealed.28

SECTION 5. That Chapter 12, Title 67, Idaho Code, be, and the same is29 hereby amended by the addition thereto of a NEW SECTION, to be known and des-30 ignated as Section 67-1230, Idaho Code, and to read as follows:31 67-1230. IDAHO PARENTAL CHOICE TAX CREDIT ADVANCE PAYMENT FUND. (1)32 There is hereby established in the state treasury the Idaho parental choice33 tax credit advance payment fund, to be administered by the state tax commis-34 sion.35 (2) Moneys in the fund shall:36 (a) Consist of the following:37 (i) Legislative appropriations and transfers;38 (ii) Donations and contributions made to the fund;39 (iii) Reversions of unused, paid back, or recovered advance pay-40 ment funds; and41 (iv) Interest earned on idle moneys in the fund; and42 (b) Be continuously appropriated to pay advance payments awarded un-43 der the Idaho parental choice tax credit program established in section44 63-3029N, Idaho Code.45

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SECTION 6. Sections 1 and 3 of this act shall be in full force and effect1 on and after January 1, 2027, and Sections 2, 4, and 5 of this act shall be in2 full force and effect on and after January 1, 2028.3