id-35-0103-2601: Property Tax Administrative Rules

Dear Senators Ricks, Adams, Rabe, and Representatives Cannon, Weber, Gannon: The Legislative Services Office, Research and Legislation, has received the enclosed rules of the State Tax Commission: IDAPA 35.01.03 - Property Tax Administrative Rules-Proposed Rule (Docket No. 35-0103-2601). Pursuant to Section 67-454, Idaho Code, a meeting on the enclosed rules may be called by the cochairmen or by two (2) or more members of the subcommittee giving oral or written notice to Research and Legislation no later than fourteen (14) days after receipt of the rules' analysis from Legislative Services. The final date to call a meeting on the enclosed rules is no later than 10/23/2026. If a meeting is called, the subcommittee must hold the meeting within forty-two (42) days of receipt of the rules' analysis from Legislative Services. The final date to hold a meeting on the enclosed rules is 11/20/2026. The germane joint subcommittee may request a statement of economic impact with respect to a proposed rule by notifying Research and Legislation. There is no time limit on requesting this statement, and it may be requested whether or not a meeting on the proposed rule is called or after a meeting has been held. To notify Research and Legislation, call 334-4854, or send a written request to the address on the memorandum attached below. Page 1 of 1 Terri Kondeff Director MEMORANDUM TO: Rules Review Subcommittee of the Senate Local Government & Taxation Committee and the House Revenue & Taxation Committee FROM: Senior Legislative Drafting Attorney - Peter Cook DATE: October 6, 2026 SUBJECT: State Tax Commission IDAPA 35.01.03 - Property Tax Administrative Rules-Proposed Rule (Docket No. 35-0103-2601) Summary and Stated Reasons for the Rule The State Tax Commission submits notice of proposed rulemaking for IDAPA 35.01.03 - Property Tax Administrative Rules. Questions regarding Rules 418, 609, and 610 were submitted to the Commission, which provided a written response to each. The Commission's response to each item is summarized immediately following the discussion of that item. As a general matter, the Commission explained that the descriptive summary was initially prepared for negotiated rulemaking and was not subsequently updated for the proposed rulemaking. The Commission stated that it has been informed the descriptive summary can be updated in the January Bulletin, which it indicated would address several of the questions identified in this memorandum. The descriptive summary of the proposed rules contains the following explanations for the substance and purpose of the proposed rules: (1) To amend Rule 609 (Homestead Exemption), to align with changes to section 63-602G, Idaho Code, fromHouseBill843(2026)thateliminatedprorationofthehomesteadexemption. Itappearsthatthesechanges align with the changes to the statute. However, it appears that the proposed rule also deletes subsection 609.04 (Determination of Residency), which authorizes the Commission to share income tax residency information with county assessors pursuant to section 63-3077(4), Idaho Code. This change does not appear to be discussed in the descriptive summary. Commission's Response: The Commission states that the deletion of subsection 609.04 was intended as cleanup rather than a substantive change, as the provision largely restates statutory authority found in sec- tions 63-602G(6) and 63-3077, Idaho Code, concerning the use of income tax information in determining eligibility for the homestead exemption. The Commission further states that the omission of this change from the descriptive summary will be corrected in the January Bulletin. (2) To amend Rule 610 to remove cross-references to subsection 609.03. However, it appears that in addition to removing cross-references, the proposed rule removes subsection 610.02.b (the definition of "Mul- Paul Headlee, Deputy DirectMatt Drake, Manager Keith Bybee, Manager April Renfro, Manager Norma Clark, Manager Legislative Services OffResearch & Legislation Budget & Policy AnalysLegislative AuditsInformation Technology Statehouse, P.O. Box 83720 Tel: 208–334–2475 Boise, Idaho 83720–0054 legislature.idaho.gov tidwelling or Multipurpose Building"). The descriptive summary does not appear to include discussion of this change, and there still remains a mention of the term "Multidwelling or Multipurpose Building" in subsection 610.09. Commission's Response: The Commission states that subsection 610.02.b was deleted because it is a restatement of section 63-602G(2)(a), Idaho Code, and that the omission of this change from the descrip- tive summary will be corrected in the January Bulletin. The Commission states that it retained subsection 610.09 because it also addresses "Related Land," which has a specific application in property assessment, and notes that the definition of "Related Land" is found in subsection 610.02.c, which is being renum- bered as subsection 610.02.b. (3) To delete Rule 618 (Computation of the Idaho Irrigation Exemption), because it is no longer relevant following the passage of House Bill 329 (2025), which added section 63-3502C, Idaho Code, that manages kilowatt-hour tax exemptions on irrigation equipment. This change appears to align with the stated change in the statute. (4) ToaddanewRule418(KilowattHoursandThermsTax)tothePropertyTaxAdministrativeRulesto implement certain provisions added by House Bill 722 (2026), which amended sections 63-405 and 63-3503C, Idaho Code. Specifically, the new Rule 418 establishes procedures for the recalculation and allocation of kilo- watt-hour and therms tax revenue proportions to various taxing districts, units, or urban renewal revenue al- location areas (hereinafter "district(s)"). Although it appears that the proposed rule attempts to implement the recent changes to statute, the following items were raised with the Commission: (a) Proposed subsection 418.01.a addresses what is termed a "split," providing that if a district splits and "the combined boundary of the successor taxing district . . . is identical to the original boundary, the proportional allocation will be changed by determining the proportion of the taxable value of the splitting taxing district or unit, or urban renewal revenue allocation area, within each successor taxing district . . ." However, the rule does not define the term "split," and as written, the term could be broad enough to encompass a boundary change that results in the formation of a new district. Additionally, because the languageappearstoprovideforallocationsto"eachsuccessortaxingdistrict,"clarificationmaybehelpful that the rule does not contemplate distributions to any district formed after January 1, 2025, consistent with section 63-3503C(4), Idaho Code, which provides that "[a] new taxing district or revenue allocation area formed after January 1, 2025, shall not be eligible for a tax distribution pursuant to this section." Commission's Response: The Commission states that a "split" is intended to describe a reorganization in which the combined boundaries of the successor districts are identical to the boundary of the original district. As an example, if School District A divides into School Districts A1 and A2, and their com- bined boundaries equal the former boundary of District A, the Commission intends to treat the event as a continuation and division of the existing district rather than a dissolution followed by the creation of unrelated new districts, with District A's existing allocation divided between A1 and A2 based on taxable value. The Commission states that successor districts created through this type of reorganization are not intended to be "new taxing districts" for purposes of section 63-3503C(4), Idaho Code. In support, the Commission notes that eligibility under section 63-405(3), Idaho Code, depends on property tax having been levied or allocated in tax year 2025, and that a successor district distributing its predecessor's share based on 2025 amounts is not claiming a new entitlement as a genuinely new district would. The Com- mission also states that a split is the inverse of a consolidation, and that subsection 418.01.a mirrors the logic of section 63-3503C(5), Idaho Code, which treats a consolidation as a continuity event by entitling the resulting district to the sum of the distributions that would have been made to each district before consolidation. (b) The Commission's descriptive summary states that the proposed rule's components "are necessary to ensure the proportional tax is not reapportioned to surviving districts after a dissolution." However, Page 2 of 4 section 63-405(3)(a), Idaho Code, appears to require reapportionment to the overlapping surviving dis- tricts ("The state tax commission shall reapportion the kilowatt-hour and thermal energy tax revenue that would have accrued to the dissolving district . . . The reapportioned tax shall be distributed to each otherwise eligible taxing district . . . in the county with boundaries that overlapped the dissolved district . . . ."). Subsection 418.01.c also requires disbursements to districts according to "the proportions of the remaining districts." Commission's Response: The Commission states that the reference to "surviving districts" was intended to address the timing of reapportionment following a dissolution. Section 63-405(3), Idaho Code, pro- vides for reapportionment in the year immediately following the dissolution, with notice to the county auditor of the changed proportions by the first Monday in March of that year, but the statute is silent as to how distributions are handled in the interim during the year in which the dissolution occurs. As an example, the Commission notes that if three districts each receive one-third of the distribution and one district dissolves, the existing proportions would continue to direct one-third of the distribution to the dissolved district until the Commission recalculates the proportions the following March, and the statute does not provide a mechanism for handling that portion of the distribution during the interim period. (c) Subsection 418.01.c of the proposed rule states that "the board of county commissioners determines any redistribution of remaining monies that would have been disbursed to the dissolved district." How- ever, it does not appear that the board of county commissioners is mentioned in sections 63-3503C or 63-405(3), Idaho Code, which assign reapportionment to the Commission, notification to the county au- ditor, and distribution through the county treasurer and auditor. Commission'sResponse: TheCommissionstatesthattheprovisionisintendedtoaddressthesametiming gap described in item (b), when a district dissolves after the January distribution but before the Commis- sion can recalculate the proportions the following March. The Commission states that, in developing the provision, it looked to the treatment of dissolved or disincorporated special purpose taxing districts in section 63-3638(10)(c)(v) and (11), Idaho Code, which provides a similar process for handling distribu- tions following a dissolution. Negotiated Rulemaking / Fiscal Impact TheCommissionstatesthatnegotiatedrulemakingwasconducted, andtheNoticeofIntenttoPromulgate Rules-NegotiatedRulemakingwaspublishedintheJuly1,2026,Bulletin35-0103-2601,IdahoAdministrative Bulletin, Vol. 26-7, page 89. The Commission also states that no new fees are reflected in the rulemaking and that no negative fiscal impact to the General Fund exceeding $10,000 is anticipated. Statutory Authority The Commission appears to have the authority under chapter 1, title 63, Idaho Code, and chapter 52, title 67, Idaho Code, to promulgate the proposed changes to Rules 609, 610, and 618. As to the addition of proposed Rule 418, the Commission has provided the explanations summarized in item (4) above, and these may be helpful for the committees' consideration regarding how the proposed rule relates to sections 63-405 and 63-3503C, Idaho Code. cc: State Tax Commission Philip Johnson *** PLEASE NOTE *** Page 3 of 4 Per the Idaho Constitution, all administrative rules may be reviewed by the Legislature during the next legisla- tive session. The Legislature has 3 options with this rulemaking docket: 1) Approve the docket in its entirety; 2) Reject the docket in its entirety; or 3) Reject the docket in part. Page 4 of 4 IDAPA 35 – STATE TAX COMMISSION 35.01.03 – PROPERTY TAX ADMINISTRATIVE RULES DOCKET NO. 35-0103-2601 NOTICE OF RULEMAKING – PROPOSED RULE AUTHORITY: In compliance with Section 67-5221(1), Idaho Code, notice is hereby given that this agency has initiated proposed rulemaking procedures. The action is authorized pursuant to Section 63-105, Idaho Code. PUBLIC HEARING SCHEDULE: Apublic hearing concerning this rulemaking will be held as follows: Thursday, September 10, 2026 1:00 p.m. (MT) In person: Coral Conference Room Idaho State Tax Commission 11321 W. Chinden Blvd., Bldg. 2 Boise, ID 83714-1021 Virtual: Join from the meeting link https://idahogov.webex.com/idahogov/j.php?MTID=m1f19df25878ed393ed666fcbdb97a613 Meeting number: 2864 231 2179 Meeting password: MShXc7JiQ74 Join by phone: +1-415-655-0001 US Toll Meeting number: 2864 231 2179 The hearing site(s) will be accessible to people with disabilities. Requests for accommodation must be made not later than five (5) days prior to the hearing, to the agency address below. DESCRIPTIVE SUMMARY: The following is a nontechnical explanation of the substance and purpose of the proposed rulemaking: The State Tax Commission will perform a critical review of changes to statutes and existing rules chapter. We will rewrite sections of this chapter by standard rulemaking and contemplate the following: • Rule 609 (Homeowners Exemption Timing): Modified to align with House Bill 843. The statute changed the primary residential exemption structure from a partial-year or full-year calculation to a strict full-year-only timeframe. The rule is being updated to prevent county assessors from mistakenly removing valid exemptions mid-year. • Rule 610 (Cross-Reference Update): This is a purely technical cleanup. Because Rule 610 directly references the criteria in Rule 609, it must be adjusted to match the new full-year timeline terminology. • Rule 618 (Irrigation Exemption Mechanism): This section is being completely deleted because it is entirely obsolete.Aprevious legislative session passed House Bill 329, which revoked Idaho Code Section 63-602N and created a completely separate mechanism pursuant to Idaho Code Section 63-3502C for managing kilowatt hour tax exemptions on irrigation equipment. • Taxing District Splits (SuccessorApportionment): To incorporate House Bill 722, a new Rule Section 418 is being added. It clarifies that when a school district, taxing unit, or urban renewal area splits into successor districts, the action will not be legally treated as a “dissolution” for tax reapportionment purposes. The rule Idaho Administrative Bulletin Page 56 September 2, 2026 – Vol. 26-9 STATE TAX COMMISSION Docket No. 35-0103-2601 Property Tax Administrative Rules Proposed Rulemaking establishes how existing allocation proportions will be divided among successor districts following a split. It also reinforces the existing treatment of consolidations, which serves as the underlying allocation framework from which successor district proportions are derived. Both components are necessary to ensure the proportional tax is not reapportioned to surviving districts after a dissolution. FEE SUMMARY: The following is a specific description of the fee or charge imposed or increased: N/A. FISCAL IMPACT: The following is a specific description, if applicable, of any negative fiscal impact on the state general fund greater than ten thousand dollars ($10,000) during the fiscal year as a result of this rulemaking: None. NEGOTIATED RULEMAKING: Pursuant to Section 67-5220(1), Idaho Code, negotiated rulemaking was conducted. The Notice of Intent to Promulgate Rules - Negotiated Rulemaking was published in the July 1, 2026, Bulletin 35-0103-2601, IdahoAdministrative Bulletin, Vol. 26-7, page 89. INCORPORATION BY REFERENCE: Pursuant to Section 67-5229(2)(a), Idaho Code, the following is a brief synopsis of why the materials cited are being incorporated by reference into this rule: There are no documents incorporated by reference affected by this rulemaking. ASSISTANCE ON TECHNICAL QUESTIONS, SUBMISSION OF WRITTEN COMMENTS: For assistance on technical questions concerning the proposed rule, contact Garin Evans at garin.evans@tax.idaho.gov or (208) 332- 6624. Anyone may submit written comments regarding this proposed rulemaking. All written comments must be directed to the undersigned and must be delivered on or before October 2, 2026. DATED this 2nd day of September, 2026. Philip Johnson, Tax Research Specialist/Rules Officer Idaho State Tax Commission 11321 W. Chinden Blvd., Bldg. 2, Boise ID 83714 PO Box 36. Boise ID 83722-0036 philip.Johnson@tax.idaho.gov (208) 334-7505 THE FOLLOWING IS THE PROPOSED TEXT OF DOCKET NO. 35-0103-2601 (Only Those Sections WithAmendmentsAre Shown.) 35.01.03 – PROPERTY TAX ADMINISTRATIVE RULES 418. KILOWATT HOURS AND THERMS TAX. Sections 63-405, 63-3503C, Idaho Code