Amends existing law to revise the total amount of tax credits available in the 2026 and 2027 tax years.

LEGISLATURE OF THE STATE OF IDAHO Sixty-eighth Legislature Second Regular Session - 2026 IN THE SENATE SENATE BILL NO. 1281 BY EDUCATION COMMITTEE AN ACT1 RELATING TO THE IDAHO PARENTAL CHOICE TAX CREDIT; AMENDING SECTION 63-3029N,2 IDAHO CODE, TO REVISE A PROVISION REGARDING THE TOTAL AMOUNT OF TAX3 CREDITS AUTHORIZED FOR ALL TAXPAYERS; AND DECLARING AN EMERGENCY.4

Be It Enacted by the Legislature of the State of Idaho:5

SECTION 1. That Section 63-3029N, Idaho Code, be, and the same is hereby6 amended to read as follows:7 63-3029N. IDAHO PARENTAL CHOICE TAX CREDIT. (1) There is hereby estab-8 lished the Idaho parental choice tax credit.9 (2) For the purpose of this section:10 (a) "Academic instruction" means kindergarten through grade 12 in-11 struction that includes, at a minimum, English language arts, mathemat-12 ics, science, and social studies.13 (b) "Eligible student" means:14 (i) A full-time resident of Idaho who is five (5) to eighteen (18)15 years of age; or16 (ii) A child with disabilities requiring ancillary personnel as17 defined in section 33-2001, Idaho Code, who is five (5) to twenty-18 one (21) years of age.19 (c) "Federal poverty level" means the federal poverty guidelines pub-20 lished and updated annually by the United States department of health21 and human services.22 (d) "Nonpublic school" means a private school, microschool, or learn-23 ing pod that provides academic instruction to eligible students, which24 academic instruction may be provided in person, online, virtually, or25 through any combination thereof, and such academic instruction is:26 (i) Provided by an accredited school; or27 (ii) Documented in a portfolio of evidence or learning record that28 indicates the student's growth. Records of the instruction shall29 be retained sufficient to establish that the instruction meets30 the requirements of paragraph (a) of this subsection and shall be31 available in the case of any audit by the state tax commission.32 (e) "Parent" means an eligible student's parent, legal guardian, or33 foster parent, if such foster parent is licensed and in good standing34 pursuant to chapter 12, title 39, Idaho Code.35 (f) "Qualified expenses" means kindergarten through grade 12 tuition36 or fees for attending a nonpublic school, tutoring, nationally stan-37 dardized assessments, assessments used to determine college admission,38 advance placement examinations, industry-recognized certification ex-39 ams, and preparatory courses for nationally standardized assessments.40 "Qualified expenses" also means costs for textbooks, curricula used for41 kindergarten through grade 12 academic instruction, and transporta-42

2 tion costs to and from a facility incurred for the purposes of receiving1 kindergarten through grade 12 academic instruction, including public2 transportation, ridesharing, and the use of privately owned vehicles,3 for which reimbursement shall use the mileage rate applicable to state4 employee travel in effect at the time the travel occurs. "Qualified ex-5 penses" shall not include expenses paid with funds received from a grant6 under section 33-1031, Idaho Code, or reimbursement pursuant to section7 33-4603, Idaho Code.8 (3) The Idaho parental choice tax credit shall be administered as pro-9 vided in this section. For tax year 2025 and subsequent tax years, there10 shall be allowed a refundable tax credit up to five thousand dollars ($5,000)11 per eligible student against the tax imposed by this chapter for any parent:12 (a) Who incurs qualified expenses of up to five thousand dollars13 ($5,000) per eligible student during the tax year, if each eligible14 student is a dependent and is properly claimed on the parent's full-time15 Idaho resident individual income tax return; and16 (b) Who timely and properly files an application.17 (4) The state tax commission shall prescribe forms for the purpose of18 applying for and claiming the credit authorized by this section. The forms19 shall identify the civil and criminal penalties provided in sections 63-304620 and 63-3075, Idaho Code, for providing false and fraudulent tax information21 and shall require the parents to affirm under oath that the information sub-22 mitted in the form is true and accurate. The forms shall also require any23 parent who has previously received a credit authorized by this section to24 certify and attach evidence that the parent completed the satisfaction and25 engagement survey required under subsection (14) of this section. Begin-26 ning in January 2026, and each year thereafter, the application period shall27 open on January 15 and shall remain open for a period of sixty (60) days. The28 state tax commission shall notify parents whether they will receive a credit29 award. Such notification must be within thirty (30) days of the close of the30 application period.31 (5) The state tax commission shall calculate the total amount of cred-32 its claimed in completed applications that qualify under subsection (3) of33 this section. If the total amount does not exceed the annual maximum limit34 provided in subsection (12) of this section, the state tax commission shall35 re-open the application period to receive new applications. Such applica-36 tions shall be accepted until August 15 or until the annual maximum limit is37 reached, whichever is first.38 (6) Credits shall be issued on a yearly basis. For applications re-39 ceived in 2026, the state tax commission shall give priority to parents whose40 modified adjusted gross income as indicated on their most recently filed tax41 return does not exceed three hundred percent (300%) of the federal poverty42 level. Starting in the 2027 application period, the state tax commission43 shall give priority status to applications from parents who received a44 credit in the prior year, followed by parents whose taxable income as indi-45 cated on their most recently filed tax return does not exceed three hundred46 percent (300%) of the federal poverty level.47 (7) The refundable tax credit limit under subsection (3) of this sec-48 tion shall be increased to seven thousand five hundred dollars ($7,500) for49 each eligible student up to twenty-one (21) years of age who is also con-50

3 sidered a child with disabilities requiring ancillary personnel as defined1 in section 33-2001, Idaho Code. Parents claiming an increased credit under2 this subsection shall document the student's diagnosis or other determina-3 tion made by an Idaho licensed health care provider or the student's eligi-4 bility for services under an individualized education program in accordance5 with the federal individuals with disabilities education act.6 (8) The refundable tax credit provided in this section, including the7 advance payment, shall not constitute Idaho taxable income.8 (9) The application forms pursuant to subsection (4) of this section9 shall permit parents to elect a onetime advance payment of the credit for10 each eligible student. When a parent elects to receive an advance payment11 pursuant to this subsection, the credit shall be issued in one (1) install-12 ment, to be paid within sixty (60) days of notifying a parent of such credit13 award but not later than August 30. The state tax commission shall approve14 advance payments only for eligible students whose parents' modified ad-15 justed gross income as indicated on their most recently filed tax return16 does not exceed three hundred percent (300%) of the federal poverty level.17 Advance payments made under this subsection may be spent only on qualified18 expenses for which the parent may claim a credit under the provisions of this19 section. In order to enable parents whose modified adjusted gross income20 does not exceed three hundred percent (300%) of the federal poverty level to21 pay for a student's education, an advance payment that is expended on quali-22 fied expenses for an eligible student may be claimed for such expenditure in23 that year and a parental choice tax credit shall be allowed on a parent's tax24 return for that year, subject to the remaining requirements of this chapter.25 (10) Parents claiming the Idaho parental choice tax credit shall:26 (a) Claim the credit for only qualified expenses incurred on behalf of27 an eligible student;28 (b) Not claim the credit for any semester in which a student was29 enrolled full-time or part-time in a public school, public char-30 ter school, public virtual charter school, public magnet school, or31 part-time public kindergarten.32 (c) Not claim the credit for any tuition or fees related to academic in-33 struction provided by the parent to such parent's eligible student;34 (d) Ensure no other parent claims a credit for an eligible student. In35 the event more than one (1) parent claims a credit under this section for36 the same eligible student in the same year, the provisions of section37 63-3029L(2), Idaho Code, shall be used to determine which parent is en-38 titled to receive the credit; and39 (e) Fill out and submit the satisfaction and engagement survey provided40 for in subsection (14) of this section. No parent shall be eligible to41 receive a credit under the provisions of this section in a subsequent42 year if such parent has not submitted such survey for the last year that43 such parent received the credit.44 (11) If the credit exceeds the tax imposed by this chapter, the excess45 credit amount shall be refunded to the taxpayer. The state tax commission46 shall design the tax return forms to account for advance payment of the47 credit when calculating the tax imposed by this chapter.48 (12) The total amount of tax credits authorized for all taxpayers under49 this section shall not exceed forty-eight million dollars ($48,000,000)50

4 in tax year 2026, forty seven million five hundred thousand dollars1 ($47,500,000) in tax year 2027, and fifty million dollars ($50,000,000) each2 tax year thereafter. In the event the total amount of claims for tax credits3 allowed by this section exceeds forty-eight million dollars ($48,000,000)4 in tax year 2026, forty seven million five hundred thousand dollars5 ($47,500,000) in tax year 2027, or fifty million dollars ($50,000,000)6 thereafter, the credits shall be allowed in full to parents whose appli-7 cations were properly and timely filed and who have priority status under8 subsection (6) of this section, followed by the remaining parents who filed9 complete applications on a first-come, first-served basis, until the an-10 nual maximum limit is reached. The state tax commission shall create and11 maintain a waiting list demonstrating who would be eligible on a first-come,12 first-served basis if the annual maximum limit for credits allowed under13 this section is increased.14 (13)(a) Beginning with the first regular session of the sixty-ninth15 Idaho legislature in 2027, the state tax commission shall provide an16 annual report to the governor, the senate local government and taxation17 committee, the house revenue and taxation committee, and the joint fi-18 nance-appropriations committee that shall include:19 (i) The total amount of tax credits provided each year under this20 section;21 (ii) The number of parents who applied each year for the Idaho22 parental choice tax credit;23 (iii) The amount of the average tax credit allowed;24 (iv) The number of credits distributed to parents with an adjusted25 gross income below three hundred percent (300%) of the federal26 poverty level;27 (v) The number of parents who applied each year for the advance28 payment pursuant to subsection (9) of this section, the number of29 advance payments awarded, and the median amount of the advance30 payments awarded;31 (vi) The geographic area of parents applying for the credit;32 (vii) The number of eligible students on the waiting list for each33 year; and34 (viii) A list of the categories of qualified expenses for which35 recipients used the tax credit, which shall include the dollar36 amounts for each category listed in subsection (2)(f) of this sec-37 tion.38 (b) The report shall not include any personally identifying informa-39 tion of eligible students, their parents, or their households.40 (14) Beginning in 2026, and each year thereafter, the legislative ser-41 vices office shall deliver to each parent who has received a tax credit under42 the provisions of this section a parent satisfaction and engagement survey43 to evaluate the performance of the nonpublic school that the eligible stu-44 dent attended. The survey shall include but not be limited to the quality of45 school leadership, school safety, student engagement, quality of academic46 instruction, and quality of learning outcomes. The state tax commission47 shall provide the legislative services office with contact information to48 identify each parent receiving a credit and any other information required49 for the legislative services office to properly deliver the surveys required50

5 under this subsection, and shall deliver the surveys to the parents no later1 than January 15 each year. Each parent shall complete the survey and submit2 the completed survey to the legislative services office no later than March3 15. Beginning in 2027, the legislative services office shall submit a report4 to the governor, the senate local government and taxation committee, the5 house revenue and taxation committee, and the joint finance-appropriations6 committee that shall include a summary of the survey results.7 (15) Any taxpayer receiving an advance payment or claiming a tax credit8 without submission of a timely and properly prescribed form shall be ineli-9 gible to receive such payment or claim such credit. The state tax commission10 shall deny or recapture credits claimed by a parent for expenditures not au-11 thorized by the provisions of this section. If a parent has received an ad-12 vance payment for an eligible student in a previous year, the parent shall13 not claim the credit for qualified expenses incurred in a year that a stu-14 dent ceases to qualify as an eligible student, except for any portion of the15 credit that exceeds the amount of the advance payment received. If a student16 ceases to qualify as an eligible student and the parent has already received17 the credit for that year, an amount of the credit, not exceeding the amount18 of the advance payment received, shall be repaid to or recovered by the state19 tax commission and deposited into the general fund.20 (16) Parents who claim the credit on a tax return without receiving21 prior approval of an application may not receive a credit, and the state22 shall have no liability to such parent.23 (17) The state tax commission shall, in as close to real time as practi-24 cable, make available on its website the annual maximum limit, the cumula-25 tive amount of credits claimed in applications under this section, and the26 cumulative amount of advance payments issued under this section until the27 annual maximum limit is reached.28 (18) The state tax commission shall also keep records of the total ap-29 plications for credits and total claim of credits that exceed the annual max-30 imum limit.31 (19) The state tax commission shall ensure that parents of eligible32 students receive notice in the application that participation in the program33 is a parental placement under 20 U.S.C. 1412 of the federal individuals with34 disabilities education act, along with an explanation of the rights that35 parentally placed students possess under the federal individuals with dis-36 abilities education act, including eligibility for equitable services, and37 any applicable state laws and regulations.38 (20) The provisions of this section shall not be construed to permit39 any government agency to exercise control or supervision over any nonpublic40 school or to give the state authority to regulate the education of nonpublic41 school students. A nonpublic school that enrolls a student whose parent42 directs a refundable tax credit to the school pursuant to this section is not43 an agent of the state or federal government. A nonpublic school shall not44 be required to alter its creed, practices, admissions policy, or curriculum45 in order to accept students whose payment of tuition or fees stems from a46 refundable tax credit under this section.47

SECTION 2. An emergency existing therefor, which emergency is hereby48 declared to exist, this act shall be in full force and effect on and after its49 passage and approval.50