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H 961

TAXATION – Amends and adds to existing law to expand the homestead property tax exemption, to increase the sales tax rate, and to direct sales tax revenue to taxing districts to replace property tax revenue lost from the homestead exemption expansion.

68th Legislature, 2nd Regular Session (2026)

HB 961 expands the homestead exemption, creates state-funded homeowner relief, and replaces lost tax revenue for districts with higher sales/use taxes.

Reported Printed and Referred to Ways & Means
#homesandhousing #realproperty #taxandtaxation #property #salesanduse
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Bill Summary · H 961

Summary of Idaho House Bill 961 (2026)

Purpose and Intent

  • Bill HB 961 proposes a broad set of tax policy changes in Idaho, centered on:

    • Expanding the homestead property tax exemption.
    • Increasing the state sales tax rate.
    • Directing a portion of sales tax revenue to replace property tax revenue lost from the expanded homestead exemption (via a new Homestead Property Tax Replacement Fund).

  • The bill includes retroactive and emergency-style provisions, with an effective date to be determined, and seeks to ensure taxing districts are not financially harmed by the exemption expansion.

Key Provisions and Changes

1) Homestead Property Tax Exemption (63-602G) – Expanded framework

  • The exemption would apply to the first $125,000 of market value, or 50% (currently phrasing indicates either $125,000 or 50% of market value, whichever is lesser). The bill’s text indicates a shift toward a more expansive or flexible framework depending on the final interpretation of “whichever is the lesser” versus “100%” as drafted.
  • Eligibility and administration:
    • Owner-occupied, primary dwelling.
    • Certification by the State Tax Commission that uniform appraisal in the county is ensured.
    • Owner must certify primary dwelling and residency status; changes to ownership structure (trusts, LLCs, partnerships, etc.) may be accommodated via specified proof.
    • Reapplication not required every year if conditions persist, with annual qualification standards and deadlines.
    • Provisions for military service, death, or lease scenarios to preserve or adjust eligibility.
    • Penalties, recovery of improperly claimed exemptions, and appeal rights are detailed (recoveries, liens, board of equalization pathways).
  • Administrative processes:
    • County assessors provide forms; deadlines exist for initial applications and annual requalification.
    • A data base of exemptions to prevent multiple exemptions and to verify residency for voting purposes.

2) Homeowner Property Tax Relief (63-724) – New relationship to replacement funding

  • Establishes a "Homeowner Property Tax Relief" program funded from the state.
    • Eligible property taxes: taxes on homes receiving the 63-602G exemption as of the second Monday in July, excluding certain bond and voter-approved levies.
    • Creation of a Homeowner Property Tax Relief Roll and a dedicated state fund (Homeowner Property Tax Relief Account) in the state treasury.
    • The state tax commission will determine the aggregate relief amounts by county, certify to county auditors, and then distribute funds through county treasurers to taxing districts as credits against eligible property taxes.
    • Relief is applied after the homestead exemption and cannot exceed the current taxes due.
    • Homeowners can still access other property tax relief programs; relief under this section is a credit against the tax bill.
    • Mechanisms for audits, disallowances, protests, and potential recapture of erroneous payments exist.

3) Homestead Property Tax Replacement Fund (63-725)

  • Establishes the Homestead Property Tax Replacement Fund in the state treasury.
  • Effect: Replaces property tax revenue lost by districts due to expansion of the homestead exemption with distributions from increased sales/use tax receipts.
  • Key mechanics:
    • Eligible homesteads are those with the homestead exemption as of the second Monday in July.
    • The fund is fed by distributions from sales and use taxes (63-3638) and allocated to taxing districts proportionally to statewide estimated lost revenue.
    • The process includes county-level calculations of lost revenue, a statewide proration factor, and scheduled payments to counties and then to districts.
    • Treasurers and auditors distribute funds; funds count as property tax revenues for budget purposes.

4) Sales and Use Tax Adjustments (63-3619, 63-3621, 63-3638)

  • Sales tax rate would be increased (text shows a transition from 6% to 8% in the proposed language).
  • Use tax rate adjusted correspondingly (6% to 8%).
  • Revenue distribution provisions ensure new sales/use tax receipts support the replacement fund and related state budgetary needs.
  • Distribution framework for general revenues, refunds, budget stabilization, and special accounts remains in place, with specific earmarks for transportation, local government projects, and other statutory funds.
  • Billing, collection, and enforcement provisions align with existing tax administration, with added emphasis on proportional distributions and transparency of funds.

Affected Parties and Impacts

  • Homeowners with properties receiving the expanded homestead exemption stand to see lower property taxes, subject to how the exemption calculation is finally interpreted (amount of value exempted and eligibility).
  • Taxing districts (counties, cities, school districts, special districts) would experience revenue reductions due to the larger exemption but would be offset by distributions from the Homestead Replacement Fund funded by higher sales/use tax receipts.
  • State government would administer and oversee the replacement fund, the relief program, and the expanded exemption, with new data bases and reporting requirements.
  • Counties and counties’ auditors, treasurers, and clerks would implement the new relief roll, calculate lost revenues, and administer distributions.

Procedural and Timeline Aspects

  • Effective date: The bill includes an emergency declaration and retroactive application, with specific effective dates to be established.
  • Timing for relief distributions:
    • State tax commission certifies county-level relief amounts to county auditors by early September.
    • State tax commission certifies statewide totals and prorations by mid-September.
    • December 20: First half of replacement/fund distributions to county tax collectors.
    • June 20 of the following year: Second half of distributions.
  • Replacement fund distributions are based on August 1 fund balances and September certification milestones, ensuring regular annual distributions.
  • Audits, protests, and appeals are provided for both exemption eligibility and relief payments.

Bottom Line

HB 961 orchestrates a comprehensive reform of Idaho’s property tax system by:
- Expanding the homestead exemption to reduce owner-occupied homeowners’ tax burden.
- Creating a Homeowner Property Tax Relief program to provide targeted relief funded by state resources.
- Establishing a replacement fund to shield taxing districts from revenue losses caused by the exemption expansion, financed through higher sales and use taxes.
- Introducing procedural safeguards, data sharing, and timelines to administer these interconnected changes.

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

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