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 ACT	1
RELATING TO TAXATION; PROVIDING LEGISLATIVE FINDINGS AND INTENT; REPEALING	2
SECTION 63-216, IDAHO CODE, RELATING TO A RESTRICTION ON STATE PROPERTY	3
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 SECTION	6
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 finds	10
that the rapid proliferation of non-primary residential properties and	11
high-occupancy short-term rentals has placed an unprecedented and dispro-	12
portionate strain on Idaho's public safety infrastructure. The increased	13
demand for law enforcement, emergency medical services, and fire protec-	14
tion, particularly in areas with high seasonal populations, frequently	15
outpaces the revenue generated by traditional local property tax struc-	16
tures. Furthermore, the displacement of Idaho's workforce by out-of-state	17
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 therefore	19
the intent of the Legislature to:	20
(a) Establish a sustainable revenue source dedicated to the funding of	21
emergency services and law enforcement; and	22
(b) Ensure that those who utilize Idaho's residential market for sea-	23
sonal or investment purposes contribute proportionally to the public	24
safety systems that protect their investments.	25
(2) The Legislature finds that while residential expansion adds to	26
the tax base, the growth-related costs associated with infrastructure,	27
maintenance, and the constitutional mandate to provide a "general, uniform	28
and thorough system of public, free common schools" frequently exceed the	29
revenue generated by primary residential homesteads. Under the current	30
tax system, the financial burden of rapid growth falls unfairly on Idaho's	31
long-term residents and workforce. By distinguishing between primary	32
dwellings and secondary residential investments, the state can mitigate	33
this imbalance. It is therefore the intent of the Legislature to:	34
(a) Utilize a state-level levy on non-primary residential properties	35
to offset the increased financial obligations of the state and its local	36
taxing districts caused by rapid expansion; and	37
(b) Direct revenue from such state-level levy toward direct property	38
tax credits for primary homesteads, thereby lowering the tax burden for	39
Idaho citizens.	40
(3) In accordance with Section 2, Article VII of the Constitution of	41
the State of Idaho, the Legislature hereby declares that this state property	42
tax is needful to ensure the long-term viability of Idaho's physical infra-	43

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structure. The Legislature finds that the conversion of residential neigh-	1
borhoods into high-turnover investment properties places unique stress on	2
local road networks, water systems, and sewer facilities originally engi-	3
neered for lower-intensity use. Seasonal surges and high-occupancy periods	4
require accelerated maintenance of public thoroughfares and necessitate	5
expanding water treatment and sewage processing capacities to handle peak	6
demand. Because these capital-intensive utilities must be maintained at	7
maximum capacity regardless of fluctuating occupancy rates, the costs of	8
such readiness must be shared by those driving the demand. It is therefore	9
the intent of the Legislature to ensure that the development and mainte-	10
nance of roads, water systems, and sewer infrastructure are funded through	11
a system where secondary residential investments contribute to community	12
infrastructure that sustains their property value.	13
SECTION 2. That Section 63-216, Idaho Code, be, and the same is hereby	14
repealed.	15
SECTION 3. That Chapter 6, Title 63, Idaho Code, be, and the same is	16
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 section	28
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 who	32
is a resident of the state of Idaho and who has been granted a homestead	33
exemption pursuant to section 63-602G, Idaho Code, for a primary resi-	34
dence within the state; however, this exemption shall not apply to any	35
property utilized as a short-term rental for more than thirty (30) days	36
in a calendar year, unless said short-term rental has a maximum occu-	37
pancy level of six (6) or fewer individuals; and	38
(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 and	40
is not subleased by such tenant.	41
(2) Any person who knowingly provides false information regarding the	42
occupancy, use, or homestead status of residential property to avoid the	43
state property tax shall be subject to the penalties for escaped assessments	44
as provided in section 63-1401, Idaho Code, and the recovery of back taxes	45
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 hereby	1
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 in	4
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 valuation	6
of all the taxable property in the county for such year in order to raise the	7
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 of	9
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 section	12
9, article VII, of the constitution of the state of Idaho. There is hereby	13
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 each	16
dollar of the taxable value of all real and personal property subject to	17
such tax; and	18
(b) The county treasurer shall collect the state property tax imposed	19
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 the	21
state property tax shall be remitted to the state treasurer for deposit	22
into the state property tax fund.	23
(3) There is hereby created in the state treasury the state property tax	24
fund. The fund shall consist of moneys deposited into it pursuant to this	25
section, and such moneys are continuously appropriated to be distributed by	26
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 shall	30
be distributed to the county and the cities and fire districts therein	31
to be used exclusively to fund law enforcement services, fire pro-	32
tection services, and emergency medical services. Such funds shall	33
be allocated in proportion to each entity's share of the total public	34
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 the	38
extent such revenues are expended for sheriff services, jails,	39
fire services, or ambulance services;	40
(ii) An ambulance service district levy pursuant to section	41
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, Idaho	45
Code, to the extent such revenues are expended for police ser-	46
vices, fire services, or ambulance services; and	47
(v) A city police retirement levy pursuant to section 50-1512,	48
Idaho Code;	49

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(b) Thirty percent (30%) of funds collected within such county shall	1
be returned to the county for the purpose of providing a direct credit	2
against the property taxes due for homeowners receiving the homestead	3
exemption provided in section 63-602G, Idaho Code, located within such	4
county. The state tax commission shall calculate a flat-dollar credit	5
amount by dividing the total amount of funds allocated to the county	6
pursuant to this paragraph by the total number of properties receiv-	7
ing the homestead exemption in such county to determine the amount of	8
the credit to be applied to each property receiving the homestead ex-	9
emption. Such credit shall be applied to the property taxes due for	10
each homeowner entitled to a credit, and if the amount of the credit is	11
greater than the amount of property taxes due, the balance shall be paid	12
to the homeowner; and	13
(c) Twenty percent (20%) of funds collected within such county shall	14
be distributed to the county and the cities therein to be used exclu-	15
sively to fund infrastructure, capital expenditures, and maintenance	16
costs related to the following services: roads, water, sewer, fire pro-	17
tection, ambulance, and public safety. Such funds shall be allocated to	18
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 such	22
funds to the governmental entity that provides the listed services.	23
(4) Amounts distributed to cities and counties pursuant to this section	24
shall not be included in the amount of property tax revenues to finance an	25
annual budget for the purposes of sections 63-802 and 63-803, Idaho Code, and	26
shall not be used in computing the limitations on increases in property tax	27
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

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