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S 1281

IDAHO PARENTAL CHOICE TAX CREDIT – Amends existing law to revise the total amount of tax credits available in the 2026 and 2027 tax years.

68th Legislature, 2nd Regular Session (2026)

Idaho raises a state-funded Parental Choice Tax Credit with new annual caps for 2026-2027, expands a disability boost, and adds reporting and safeguards to ensure timely access and

Reported Printed; referred to Local Government & Taxation
#children #creditandcreditors #education #guardiansandconservators #parents #schoolsandschooldistricts #students #taxandtaxation #income
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Bill Summary · S 1281

Overview

  • Bill: S 1281
  • Session: 2026 (Idaho)
  • Jurisdiction: Idaho
  • Title: Idaho Parental Choice Tax Credit – Amends existing law to revise the total amount of tax credits available in the 2026 and 2027 tax years
  • Type: Emergency provisions; effective upon passage

Main purpose and intent

  • Replaces the existing annual cap for the Idaho Parental Choice Tax Credit (IPCTC) with new dollar limits for specific years.
  • Aims to align the program’s total credits with anticipated state revenues while maintaining access to educational choice for families.
  • Continues the program structure (eligibility, administration, priority rules, reporting, and safeguards) with adjusted funding limits.
  • Declares an emergency to ensure timely implementation for the 2026 tax year.

Key provisions and changes

  • Definitions (unchanged framework): Reinforces definitions for academic instruction, eligible students, poverty level, nonpublic schools, qualified expenses, and parent relationships.
  • Qualified expenses (scope maintained): Tuition/fees for nonpublic schools, tutoring, assessments, college-admission prep, certifications, curricula, textbooks, transportation costs, and related items. Excludes funds from certain state grants or reimbursements.
  • Credit amount and eligibility (unchanged mechanics): For tax year 2025 onward, refundable credit up to $5,000 per eligible student, subject to annual limits and proper filing.
  • Application window and process (unchanged framework):
    • From 2026 onward, application period opens January 15 for 60 days.
    • Tax Commission notifies whether a credit is awarded within 30 days after the close of the period.
    • Forms require penalties disclosures and proof of prior survey compliance.
  • Priority and allocation (unchanged structure):
    • 2026: Priority to applicants whose modified adjusted gross income (MAGI) is ≤ 300% of the federal poverty level (FPL).
    • 2027 onward: Priority to those who received a credit previously, followed by MAGI-based priority (≤ 300% FPL).
  • Disability provision: Increased credit cap for students with disabilities (up to $7,500 per eligible student up to age 21) with required documentation.
  • Advance payments: Eligible for a one-time advance payment (up to $5,000) for families at or below 300% FPL; advance must be used for qualified expenses and can be claimed as a credit in that year.
  • Maximum annual credits (new caps):
    • 2026: Total credits capped at $48,000,000 for all taxpayers.
    • 2027: Total credits capped at $47,500,000.
    • 2028 and beyond: Total credits capped at $50,000,000 per year. If claims exceed the cap, priority recipients receive credits first, followed by remaining applicants on a first-come, first-served basis. A waiting list must be maintained.
  • Reporting and transparency:
    • Beginning 2027, annual public report to governor and legislative committees on: total credits, number of applicants, average credit, low-income recipients, advance payments, geographic distribution, waiting list, and categories/dollar amounts of qualified expenses.
    • Legislators’ office receives parent satisfaction and engagement surveys; surveys delivered annually to relevant parents starting 2026.
  • Compliance and audit:
    • If a parent misreports or if an advance is improperly used, credits can be denied or recaptured.
    • Provisions for handling credits when a student ceases to be eligible.
    • Provisions ensuring nonpublic schools are not state agents and are not required to alter independent policies to participate.
  • Administrative and statutory notes:
    • The State Tax Commission administers the credit, forms, and advance payments, with real-time public visibility of caps and credits claimed.
    • If a credit exceeds tax liability, the excess is refundable.
    • No tax credit or advance payment creates taxable income for Idaho state income tax purposes.

Who/what is affected

  • Eligible students (and their families) who enroll in nonpublic (private, microschool, or learning pod) settings and incur qualified expenses.
  • Parents/guardians of eligible students who file for the IPCTC and potentially receive an advance payment.
  • Nonpublic schools participating in the program, which must comply with documentation and reporting requirements but are not state agents.
  • Idaho Department of Revenue/State Tax Commission: administers applications, claims, cap management, and reporting.
  • Legislative bodies (Governor, Senate Local Government and Taxation Committee, House Revenue and Taxation Committee, Joint Finance-Appropriations) receive annual program data and surveys starting 2027.

Procedural and timeline aspects

  • Effective date: The bill includes an emergency clause; it becomes effective upon passage and approval.
  • Application window: January 15 to March 15 (60 days) annually starting 2026.
  • Annual cap management: The total credits are capped as specified for 2026, 2027, and 2028 onward, with first-come, first-served allocation if the cap is exceeded.
  • Priority determination: Based on MAGI relative to FPL and prior-year participation, with a shift in prioritization framework starting 2027.
  • Reporting:
    • Public annual report beginning 2027.
    • Parent satisfaction and engagement surveys begin in 2026; survey results summarized for policy review starting 2027.
  • Advance payments: Eligible families may receive an advance payment if MAGI ≤ 300% FPL, subject to timing and expenditure rules.

Fiscal impact

  • The bill sets explicit cap levels, reducing the total IPCTC amount in 2026 and 2027 relative to a higher, unspecified prior cap, then increasing to $50,000,000 annually from 2028 onward.
  • The accompanying fiscal note identifies General Fund savings in 2026 and 2027 due to the lowered caps, with no additional impact to local governments; administrative costs are expected to be covered within existing appropriations.

Notable safeguards

  • Clear penalties for fraudulent or false tax information.
  • Verification through annual surveys to measure program impact and school performance.
  • Protections ensuring nonpublic schools’ independence and noninterference by government authorities in curricular or admissions decisions as a condition of program participation.
  • Recapture and repayment provisions if credits are misused or if a student ceases to qualify.

Compiled from official sources — confirm details with the bill’s official record.

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