Amends, repeals, and adds to existing law to establish a state property tax and to provide certain exemptions to such tax.

LEGISLATURE OF THE STATE OF IDAHO Sixty-eighth Legislature Second Regular Session - 2026 IN THE HOUSE OF REPRESENTATIVES HOUSE BILL NO. 886 BY REVENUE AND TAXATION COMMITTEE AN ACT1 RELATING TO TAXATION; PROVIDING LEGISLATIVE FINDINGS AND INTENT; REPEALING2 SECTION 63-216, IDAHO CODE, RELATING TO A RESTRICTION ON STATE PROPERTY3 TAX WHEN SALES TAX IS IN FORCE; AMENDING CHAPTER 6, TITLE 63, IDAHO CODE,4 BY THE ADDITION OF A NEW SECTION 63-602PP, IDAHO CODE, TO ESTABLISH PRO-5 VISIONS REGARDING EXEMPTIONS FROM STATE PROPERTY TAX; AMENDING SECTION6 63-801, IDAHO CODE, TO PROVIDE FOR AN ANNUAL STATE PROPERTY TAX LEVY;7 AND PROVIDING AN EFFECTIVE DATE.8

Be It Enacted by the Legislature of the State of Idaho:9

SECTION 1. LEGISLATIVE FINDINGS AND INTENT. (1) The Legislature finds10 that the rapid proliferation of non-primary residential properties and11 high-occupancy short-term rentals has placed an unprecedented and dispro-12 portionate strain on Idaho's public safety infrastructure. The increased13 demand for law enforcement, emergency medical services, and fire protec-14 tion, particularly in areas with high seasonal populations, frequently15 outpaces the revenue generated by traditional local property tax struc-16 tures. Furthermore, the displacement of Idaho's workforce by out-of-state17 investment interests has created a critical shortage of local first respon-18 ders who can afford to live in the communities they serve. It is therefore19 the intent of the Legislature to:20 (a) Establish a sustainable revenue source dedicated to the funding of21 emergency services and law enforcement; and22 (b) Ensure that those who utilize Idaho's residential market for sea-23 sonal or investment purposes contribute proportionally to the public24 safety systems that protect their investments.25 (2) The Legislature finds that while residential expansion adds to26 the tax base, the growth-related costs associated with infrastructure,27 maintenance, and the constitutional mandate to provide a "general, uniform28 and thorough system of public, free common schools" frequently exceed the29 revenue generated by primary residential homesteads. Under the current30 tax system, the financial burden of rapid growth falls unfairly on Idaho's31 long-term residents and workforce. By distinguishing between primary32 dwellings and secondary residential investments, the state can mitigate33 this imbalance. It is therefore the intent of the Legislature to:34 (a) Utilize a state-level levy on non-primary residential properties35 to offset the increased financial obligations of the state and its local36 taxing districts caused by rapid expansion; and37 (b) Direct revenue from such state-level levy toward direct property38 tax credits for primary homesteads, thereby lowering the tax burden for39 Idaho citizens.40 (3) In accordance with Section 2, Article VII of the Constitution of41 the State of Idaho, the Legislature hereby declares that this state property42 tax is needful to ensure the long-term viability of Idaho's physical infra-43

2 structure. The Legislature finds that the conversion of residential neigh-1 borhoods into high-turnover investment properties places unique stress on2 local road networks, water systems, and sewer facilities originally engi-3 neered for lower-intensity use. Seasonal surges and high-occupancy periods4 require accelerated maintenance of public thoroughfares and necessitate5 expanding water treatment and sewage processing capacities to handle peak6 demand. Because these capital-intensive utilities must be maintained at7 maximum capacity regardless of fluctuating occupancy rates, the costs of8 such readiness must be shared by those driving the demand. It is therefore9 the intent of the Legislature to ensure that the development and mainte-10 nance of roads, water systems, and sewer infrastructure are funded through11 a system where secondary residential investments contribute to community12 infrastructure that sustains their property value.13

SECTION 2. That Section 63-216, Idaho Code, be, and the same is hereby14 repealed.15

SECTION 3. That Chapter 6, 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 63-602PP, Idaho Code, and to read as follows:18 63-602PP. EXEMPTIONS FROM STATE PROPERTY TAX. (1) The following prop-19 erty is exempt from the state property tax authorized in section 63-801,20 Idaho Code:21 (a) Personal property;22 (b) Operating property;23 (c) Forest land as defined in section 63-1701, Idaho Code;24 (d) Property primarily devoted to the exploration, development, or ex-25 traction of any mineral as that term is defined in chapter 7, title 47,26 Idaho Code, and any mining claims whether patented or unpatented;27 (e) Property that qualifies for the exemption provided in section28 63-602G, Idaho Code;29 (f) Real property classified as commercial property, industrial prop-30 erty, or land actively devoted to agriculture;31 (g) Any additional residential property owned by a natural person who32 is a resident of the state of Idaho and who has been granted a homestead33 exemption pursuant to section 63-602G, Idaho Code, for a primary resi-34 dence within the state; however, this exemption shall not apply to any35 property utilized as a short-term rental for more than thirty (30) days36 in a calendar year, unless said short-term rental has a maximum occu-37 pancy level of six (6) or fewer individuals; and38 (h) Residential property that is not a primary homestead but is occu-39 pied by a tenant under a long-term lease of at least seven (7) months and40 is not subleased by such tenant.41 (2) Any person who knowingly provides false information regarding the42 occupancy, use, or homestead status of residential property to avoid the43 state property tax shall be subject to the penalties for escaped assessments44 as provided in section 63-1401, Idaho Code, and the recovery of back taxes45 and interest as provided in section 63-602G, Idaho Code.46

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SECTION 4. That Section 63-801, Idaho Code, be, and the same is hereby1 amended to read as follows:2 63-801. ANNUAL STATE PROPERTY TAX LEVY -- STATE PROPERTY TAX FUND --3 COLLECTION AND DISTRIBUTION. (1) The county commissioners in each county in4 this state must meet on the second Monday of September in each year to as-5 certain the tax rate necessary to be levied on each dollar of the valuation6 of all the taxable property in the county for such year in order to raise the7 amount of state taxes apportioned to such county by the state tax commission.8 The total of all levies must be within the limits prescribed by the laws of9 this state.10 (2) In any period during which a sales tax is in force in this state,11 there shall be no levy of the general state property tax permitted by section12 9, article VII, of the constitution of the state of Idaho. There is hereby13 levied a state property tax on real and personal property not otherwise ex-14 empted by section 63-602PP, Idaho Code, as follows:15 (a) The rate of such tax shall be two and one-half (2.5) mills on each16 dollar of the taxable value of all real and personal property subject to17 such tax; and18 (b) The county treasurer shall collect the state property tax imposed19 pursuant to this section in the same manner as other property taxes pur-20 suant to section 63-901, Idaho Code, and all revenues collected from the21 state property tax shall be remitted to the state treasurer for deposit22 into the state property tax fund.23 (3) There is hereby created in the state treasury the state property tax24 fund. The fund shall consist of moneys deposited into it pursuant to this25 section, and such moneys are continuously appropriated to be distributed by26 the state tax commission to taxing districts as provided in this section.27 The funds shall be distributed by the state tax commission to taxing dis-28 tricts within the county where the taxes were collected as follows:29 (a) Fifty percent (50%) of funds collected within such county shall30 be distributed to the county and the cities and fire districts therein31 to be used exclusively to fund law enforcement services, fire pro-32 tection services, and emergency medical services. Such funds shall33 be allocated in proportion to each entity's share of the total public34 safety-related expenses of the county and all cities within the county.35 For the purposes of this paragraph, "public safety-related expenses"36 means the sum of any revenue raised from:37 (i) A county levy pursuant to section 63-805, Idaho Code, to the38 extent such revenues are expended for sheriff services, jails,39 fire services, or ambulance services;40 (ii) An ambulance service district levy pursuant to section41 31-3901, Idaho Code;42 (iii) Any fire protection district levy pursuant to chapter 14,43 title 31, Idaho Code;44 (iv) A city general fund levy pursuant to section 50-235, Idaho45 Code, to the extent such revenues are expended for police ser-46 vices, fire services, or ambulance services; and47 (v) A city police retirement levy pursuant to section 50-1512,48 Idaho Code;49

4 (b) Thirty percent (30%) of funds collected within such county shall1 be returned to the county for the purpose of providing a direct credit2 against the property taxes due for homeowners receiving the homestead3 exemption provided in section 63-602G, Idaho Code, located within such4 county. The state tax commission shall calculate a flat-dollar credit5 amount by dividing the total amount of funds allocated to the county6 pursuant to this paragraph by the total number of properties receiv-7 ing the homestead exemption in such county to determine the amount of8 the credit to be applied to each property receiving the homestead ex-9 emption. Such credit shall be applied to the property taxes due for10 each homeowner entitled to a credit, and if the amount of the credit is11 greater than the amount of property taxes due, the balance shall be paid12 to the homeowner; and13 (c) Twenty percent (20%) of funds collected within such county shall14 be distributed to the county and the cities therein to be used exclu-15 sively to fund infrastructure, capital expenditures, and maintenance16 costs related to the following services: roads, water, sewer, fire pro-17 tection, ambulance, and public safety. Such funds shall be allocated to18 the county and the cities within the county in proportion to their re-19 spective shares of the total property tax portion of the budgets cer-20 tified for the county and each city within the county for the tax year.21 Counties and cities that do not provide these services may remit such22 funds to the governmental entity that provides the listed services.23 (4) Amounts distributed to cities and counties pursuant to this section24 shall not be included in the amount of property tax revenues to finance an25 annual budget for the purposes of sections 63-802 and 63-803, Idaho Code, and26 shall not be used in computing the limitations on increases in property tax27 revenues provided in section 63-802, Idaho Code.28 (5) The state tax commission shall, subject to legislative approval,29 establish rules to carry out the provisions of this section.30

SECTION 5. This act shall be in full force and effect on and after Jan-31 uary 1, 2027.32