Amends existing law to revise provisions regarding certain limitations of budget requests by taxing district and to provide certain exceptions to such limits.

LEGISLATURE OF THE STATE OF IDAHO Sixty-eighth Legislature Second Regular Session - 2026 IN THE HOUSE OF REPRESENTATIVES HOUSE BILL NO. 842 BY REVENUE AND TAXATION COMMITTEE AN ACT1 RELATING TO BUDGET LIMITS; AMENDING SECTION 63-802, IDAHO CODE, TO REVISE2 PROVISIONS REGARDING LIMITATIONS ON BUDGET REQUESTS AND EXCEPTIONS;3 AMENDING SECTION 31-1423, IDAHO CODE, TO PROVIDE A CORRECT CODE REFER-4 ENCE; PROVIDING SEVERABILITY; AND DECLARING AN EMERGENCY AND PROVIDING5 RETROACTIVE APPLICATION.6

Be It Enacted by the Legislature of the State of Idaho:7

SECTION 1. That Section 63-802, Idaho Code, be, and the same is hereby8 amended to read as follows:9 63-802. LIMITATION ON BUDGET REQUESTS -- LIMITATION ON TAX CHARGES --10 EXCEPTIONS. (1) Except as otherwise provided in this section, no taxing dis-11 trict shall certify a budget request for an amount of property tax revenues12 to finance an annual budget that exceeds the maximum sum permitted under this13 section:14 (a)(i) The highest dollar amount of property taxes certified for15 its annual budget for any one (1) of the three (3) tax years preced-16 ing the current tax year, which amount may be increased by a growth17 factor of not to exceed three percent (3%) plus the amount of rev-18 enue calculated as described in this subsection. The taxing dis-19 trict shall determine what portion of the three percent (3%) in-20 crease permitted under this subparagraph that it requires and then21 calculate a preliminary levy rate based on the percent chosen. In22 calculating the preliminary levy rate, the most current taxable23 market value shall be used, except that for taxable market values24 of centrally assessed operating property, the prior year's val-25 uation may be used instead of the current year's taxable market26 values. The preliminary previous year's levy rate shall be multi-27 plied by the value shown on the new construction roll compiled pur-28 suant to section 63-301A, Idaho Code, and by ninety percent (90%)29 of the value of annexation during the previous calendar year, as30 certified by the state tax commission for taxable market values of31 operating property of public utilities and by the county assessor;32 except for a fire protection district annexing property prior to33 July 1, 2021, pursuant to section 31-1429, Idaho Code, the new levy34 rate shall be multiplied by one hundred percent (100%) of the value35 of any such property annexed prior to July 1, 2021.36 (ii) The Except as provided in this subparagraph, the total budget37 increase calculated under this paragraph must not exceed eight38 percent (8%), except. For cities with a population of fewer than39 thirty thousand (30,000) people as shown in the most recent annual40 population estimate reported by the United States census bureau,41 and any fire protection district or ambulance service district42

2 providing service to such a city, the total budget increase calcu-1 lated under this paragraph must not exceed fifteen percent (15%).2 Provided, however, that any increase in the amount of property tax3 revenue to finance an annual budget added as a result of the termi-4 nation, deannexation, plan modification of, or the withdrawal of5 certain taxing districts from, a revenue allocation area of an ur-6 ban renewal district pursuant to section 63-301A(3)(f), (i), (j),7 or (k), Idaho Code, or section 50-2908(1)(g), Idaho Code, shall8 not be subject to such limitation.9 (iii) Following the first year in which a fire protection district10 has annexed city property pursuant to section 31-1429, Idaho Code,11 the city shall subtract an amount equal to the moneys spent on fire12 protection services during the last full year the city provided13 fire protection services to its residents from its budget limita-14 tion under this section.15 (b) If the taxing district has not imposed a levy for three (3) or more16 years, the highest dollar amount of property taxes certified for its an-17 nual budget for the purpose of paragraph (a)(i) of this subsection shall18 be the dollar amount of property taxes certified for its annual budget19 during the last year in which a levy was made.20 (c) The dollar amount of the actual budget request may be substituted21 for the amount in paragraph (a) of this subsection if the taxing dis-22 trict is newly created, except as may be provided in paragraph (i) of23 this subsection.24 (d) This section does not apply to school district levies imposed in25 section 33-802, Idaho Code.26 (e)(i) In the case of a nonschool district for which less than the27 maximum allowable increase in the dollar amount of property taxes28 is certified for annual budget purposes in any one (1) year prior29 to property tax year 2026, such a district may, in any following30 year, recover the forgone increase by certifying, in addition to31 any increase otherwise allowed, any or all of the increase origi-32 nally forgone. Provided however, that prior to budgeting any for-33 gone increase, the district must provide notice of its intent to do34 so, hold a public hearing that may be in conjunction with its an-35 nual budget hearing, and certify by resolution the amount of for-36 gone increase to be budgeted and the specific purpose for which the37 forgone increase is being budgeted. Upon adoption of the resolu-38 tion, the clerk of the district shall file a copy of the resolu-39 tion with the county clerk and the state tax commission. Said ad-40 ditional amount shall be included in future calculations for in-41 creases as allowed, except as provided in subparagraph (iii) of42 this paragraph.43 (ii) If the forgone increase is budgeted for the purpose of main-44 tenance and operations, the rate of recovering the reserved for-45 gone moneys may increase the taxing district's budget by no more46 than one percent (1%) two percent (2%) per year.47 (iii) If the forgone increase is budgeted for a capital project or48 projects, the rate of recovering the reserved forgone moneys may49 not exceed three percent (3%) of the taxing district's budget for50

3 the year in which the forgone increase is budgeted. Forgone moneys1 budgeted for a capital project must be deducted from the taxing2 district's forgone balance in the year in which it is budgeted.3 Upon completion of such a capital project, the taxing district4 shall certify such completion to the state tax commission and5 county clerk. If, upon certification, the state tax commission6 finds that the taxing district included forgone moneys for a capi-7 tal project in calculating the increase permitted under paragraph8 (a) of this subsection, the state tax commission shall direct the9 taxing district to reduce its property tax budget for any year10 in which the forgone moneys were used to calculate a budget in-11 crease, in an amount equal to the forgone moneys budgeted plus any12 increases attributed to the forgone moneys improperly included in13 the taxing district's property tax budget. For the purpose of this14 paragraph, a capital project includes:15 1. The construction, expansion, renovation, or replacement16 of public facilities, including the acquisition of land and17 other site improvements;18 2. The construction, expansion, or reconstruction of public19 works improvements, including roads, bridges, water sys-20 tems, sewer systems, and broadband systems; and21 3. The purchase of equipment with a useful life of ten (10)22 years or more.23 (f) If a taxing district elects to budget less than the maximum allow-24 able increase in the dollar amount of property taxes for any property25 tax year prior to 2026, the taxing district may reserve the right to re-26 cover all or any portion of that year's forgone increase in a subsequent27 year by adoption of a resolution specifying the dollar amount of prop-28 erty taxes being reserved. Otherwise, that year's forgone increase may29 not be recovered under paragraph (e) of this subsection. The district30 must provide notice of its intent to do so and hold a public hearing that31 may be in conjunction with its annual budget hearing, if applicable.32 The resolution to reserve the right to recover the forgone increase for33 that year shall be adopted at the annual budget hearing of the taxing34 district if the district has a budget hearing requirement.35 (g) In the case of cities, if the immediately preceding year's levy sub-36 ject to the limitation provided by this section is less than 0.004, the37 city may increase its budget by an amount not to exceed the difference38 between 0.004 and the actual prior year's levy multiplied by the prior39 year's market value for assessment purposes. The additional amount40 must be approved by sixty percent (60%) of the voters voting on the ques-41 tion at an election called for that purpose and held on the date in May or42 November provided by law and may be included in the annual budget of the43 city for purposes of this section.44 (h) A taxing district may submit to the electors within the district45 the question of whether the budget from property tax revenues may be46 increased beyond the amount authorized in this section, but not beyond47 the levy authorized by statute. The additional amount must be approved48 by sixty-six and two-thirds percent (66 2/3%) or more of the voters49 voting on the question at an election called for that purpose and held50

4 on the May or November dates provided by section 34-106, Idaho Code.1 If approved by the required minimum sixty-six and two-thirds percent2 (66 2/3%) of the voters voting at the election, the new budget amount3 shall be the base budget for the purposes of this section.4 (i) When a nonschool district consolidates with another nonschool5 district or dissolves and a new district performing similar governmen-6 tal functions as the dissolved district forms with the same boundaries7 within three (3) years, the maximum amount of a budget of the district8 from property tax revenues shall not be greater than the sum of the9 amounts that would have been authorized by this section for the district10 itself or for the districts that were consolidated or dissolved and in-11 corporated into a new district.12 (j) This section does not apply to cooperative service agency levies13 imposed in sections 33-317 and 33-317A, Idaho Code.14 (k) The amount of money received in the twelve (12) months immediately15 preceding June 30 of the current tax year as a result of distributions of16 the tax provided in section 63-3502B(2), Idaho Code.17 (2) In the case of fire districts, during the year immediately follow-18 ing the election of a public utility or public utilities to consent to be pro-19 vided fire protection pursuant to section 31-1425, Idaho Code, the maximum20 amount of property tax revenues permitted in subsection (1) of this section21 may be increased by an amount equal to the current year's taxable value of the22 consenting public utility or public utilities multiplied by that portion of23 the prior year's levy subject to the limitation provided by subsection (1) of24 this section.25 (3) No board of county commissioners shall set a levy, nor shall the26 state tax commission approve a levy for annual budget purposes, which ex-27 ceeds the limitation imposed in subsection (1) of this section unless au-28 thority to exceed such limitation has been approved by a majority of the tax-29 ing district's electors voting on the question at an election called for that30 purpose and held pursuant to section 34-106, Idaho Code, provided however,31 that such voter approval shall be for a period of not to exceed two (2) years.32 (4) The amount of property tax revenues to finance an annual budget does33 not include revenues from nonproperty tax sources and does not include rev-34 enue from levies for the payment of judicially confirmed obligations pur-35 suant to sections 63-1315 and 63-1316, Idaho Code, and revenue from levies36 that are voter-approved for bonds, override levies or supplemental levies,37 plant facilities reserve fund levies, school emergency fund levies, or for38 levies applicable to newly annexed property or for levies applicable to new39 construction as evidenced by the value of property subject to the occupancy40 tax pursuant to section 63-317, Idaho Code, for the preceding tax year. The41 amount of property tax revenues to finance an annual budget does not include42 any property taxes that were collected and refunded on property that is ex-43 empt from taxation, pursuant to section 63-1305C, Idaho Code.44 (5) The amount of property tax revenues to finance an annual budget45 shall include moneys received as recovery of property tax for a revoked pro-46 visional property tax exemption under section 63-1305C, Idaho Code.47 (6) For tax year 2023, before calculating the amount required in sub-48 section (1)(a)(i) of this section, the board of county commissioners shall49 reduce the approved property tax levy portion of its budget for the immedi-50

5 ate prior three (3) years in an amount equal to the amount levied for indigent1 public defense. The reduced budget amount shall be the base budget for the2 purpose of subsection (1)(a)(i) of this section.3 (7)(a) Notwithstanding any other provision of this section, the elec-4 tors of cities may, if approved by the same percentage vote required for5 passage of a budget increase pursuant to subsection (1)(g) of this sec-6 tion, approve a reduction in the base budget of such city through the7 initiative process set forth in section 34-1801B, Idaho Code.8 (b) Notwithstanding any other provision of this section, the electors9 of counties may, if approved by the same percentage vote required for10 passage of a budget increase pursuant to subsection (1)(h) of this sec-11 tion, approve a reduction in the base budget of such county through the12 initiative process set forth in section 34-1801C, Idaho Code.13 (c) An initiative measure approved pursuant to this subsection shall14 specify the dollar amount or percentage by which the base budget shall15 be reduced. The reduced base budget shall apply to the next city or16 county budget required to be certified pursuant to section 63-803,17 Idaho Code, following the voter approval of the initiative and shall18 thereafter constitute the base budget for purposes of calculating al-19 lowable increases under this section. For purposes of this subsection,20 "base budget" means the highest dollar amount of property taxes from21 which a city or county begins calculating its allowable annual budget22 pursuant to subsection (1) of this section, prior to applying the growth23 factor or any other additions in such subsection.24

SECTION 2. That Section 31-1423, Idaho Code, be, and the same is hereby25 amended to read as follows:26 31-1423. LEVY -- RECOMMENDED LEVY -- ELECTION. (1) Each year, immedi-27 ately prior to the annual county levy of taxes, the board of commissioners28 of each fire protection district, organized and existing under this chapter,29 may levy a tax upon all the taxable property within the boundaries of such30 district sufficient to defray the cost of equipping and maintaining the dis-31 trict of twenty-four hundredths percent (.24%) of market value for assess-32 ment purposes, to be used for the purposes of this chapter and for no other33 purpose. The levy shall be made by resolution entered upon the minutes of the34 board of commissioners of the fire protection district, and it shall be the35 duty of the secretary of the district, immediately after entry of the resolu-36 tion in the minutes, to transmit to the county auditor and the county asses-37 sor certified copies of the resolution providing for such levy. Said taxes38 shall be collected as provided by section 63-812, Idaho Code.39 (2) If two (2) or more fire protection districts consolidate into one40 (1) district, the provisions of section 63-802, Idaho Code, shall apply to41 the consolidated district's budget request. In addition, the consolidated42 district shall receive the benefit of foregone increases accumulated by the43 former districts under section 63-802(1)(a) 63-802, Idaho Code.44

SECTION 3. SEVERABILITY. The provisions of this act are hereby declared45 to be severable and if any provision of this act or the application of such46 provision to any person or circumstance is declared invalid for any reason,47

6 such declaration shall not affect the validity of the remaining portions of1 this act.2

SECTION 4. An emergency existing therefor, which emergency is hereby3 declared to exist, this act shall be in full force and effect on and after its4 passage and approval, and retroactively to January 1, 2026.5