Updated september 2019

A Battle of the Experts in Idaho

The Supreme Court recently decided a property tax case involving the value of a food processing facility: SSI Food Services, Inc. v. Stender. The case presented “a battle of the experts” with a range of values. Selecting a value between the two originally presented, the Board of Tax Appeals cut the value by approximately half. On appeal, Canyon County produced a new rebuttal expert with a value just under the original assessed value. The district court adopted that value based in part on the cost approach. It found further support in the value assessed when the taxpayer purchased the property in 2013 plus subsequent investments. The taxpayer appealed based in part on a lack of evidence of the amounts it invested in the facility. But the Supreme Court faulted the taxpayer for failing to rebut the County’s evidence on that issue at the trial and affirmed the district court’s decision.
 
Michelle DeLappe and Norm Bruns
Foster Garvey
American Property Tax Counsel (APTC)

 

Idaho Property Tax Update Archive

Updated JUNE 2019

A Fresh Look at Idaho Property Tax Rules

The State Tax Commission’s Property Tax Rules Committee has been busy reviewing all Idaho property tax rules to determine which ones to eliminate. This is part of a general review of all Idaho administrative rules. Idaho has an unusual system whereby the legislature must vote on whether to continue rules forward each year; if they do not, all rules expire at the end of June. The 2019 legislative session failed to pass this annual “drop dead” bill, thus handing Gov. Brad Little an opportunity to streamline regulations and choose which temporary rules he will adopt until the legislature convenes again in 2020.

Committee Co-chair Kathylynn Ireland says that most property tax rules will become temporary rules on July 1. Rules that are not needed will find a new home in a manual; though no longer binding regulations, they will continue to exist as guidance and will be available online.
 
Michelle DeLappe and Norm Bruns
Garvey Schubert Barer, P.C.
American Property Tax Counsel (APTC)

Updated MARCH 2019

The Wheels of Justice Turn Slowly: Sewer Fee Litigation Drags On

Idaho has frequent litigation over city-imposed fees that may be illegal taxes in disguise. In March 2015 we reported on a case involving a “sewer capitalization fee” charged by the city of Hayden. The trial court upheld the fee, but the Supreme Court reversed and remanded for further proceedings. The two opinions from the Supreme Court (a 3-justice majority opinion and a 2-justice concurrence) produced confusion on remand. The confusion was compounded by a 2017 case from the opposite corner of the state involving wastewater charges by the city of Blackfoot. The Supreme Court’s Blackfoot opinion discussed its Hayden decision in a way that, in hindsight, was misleading. Meanwhile, the Hayden case was reprocessed by the trial court with the city losing this time. The case then took a second trip to the Supreme Court and in late December was reversed and remanded for still more proceedings. The city of Hayden lives to fight another day!

Norm Bruns and Michelle DeLappe
Garvey Schubert Barer
American Property Tax Counsel (APTC)

Updated December 2018

Election Update and Judicial Appointments

Idaho’s election results promise a continuation of current policies with Lt. Gov. Brad Little winning the governor race. The legislature, which convenes on January 7, 2019, will see more change given heavy turnover in legislative committee chairs. The new governor will give his first State of the State address that same day.

In 2018, Gov. C.L. “Butch” Otter made two appointments to the five-member state supreme court. On November 30, he appointed 7th District Court Judge Gregory Moeller from eastern Idaho to fill retiring Justice Joel Horton’s place. Earlier in the year he appointed 2nd District Court Judge John Stegner from Moscow to fill retiring Justice Warren Jones’s place. He has also appointed attorney Amanda Brailsford to the court of appeals to fill the upcoming vacancy created by the retirement of Judge Sergio Gutierrez at the end of the year. All three new appointees have significant experience in private practice.
 
Michelle DeLappe and Norm Bruns
Garvey Schubert Barer
American Property Tax Counsel (APTC)

Updated september 2018

New Property Tax Case Pending Before Supreme Court

The state supreme court will soon decide whether an apartment complex owned by a 501(c)(3) nonprofit lost its property tax exemption in 2016 by renting some apartments that year to individuals with incomes over 60% of the median income threshold. The exemption requires all rental units except the manager’s be dedicated to low-income tenants. It specifies how many units must be rented to tenants with various income thresholds, with 60% as the highest. The district court ruled the exemption did not apply. The taxpayer, Aspen Park, Inc., argued that (1) the requirements overlap so that renting most of the units to very low-income tenants frees the rest from restrictions; and (2) an exception exists when there are not enough low-income applicants. The court said only the legislature could modify the requirements to address the dearth of qualified applicants. If the taxpayer prevails, the precedent could apply by analogy in other types of exemption cases where facts and circumstances may justify a departure from a strict application of the statutory requirements.
 
Michelle DeLappe and Norm Bruns
Garvey Schubert Barer
American Property Tax Counsel (APTC)

Updated June 2018

New Capital Investments Exemption Clarification and 2018 Tax Estimates

Effective July 1, the Idaho legislature has clarified that the property tax exemption for new capital investments applies not only to locally assessed real and personal property, but also to “operating property.” “Operating property” includes property owned by regulated telecommunications companies, power companies, the petroleum and gas industry, and other centrally assessed taxpayers. As before, the exemption applies to new capital investments of at least $1 billion by limiting the property tax revenue of local taxing districts to the property taxes payable on $400 million in assessed value.

In other recent news, taxpayers can now estimate their 2018 property taxes for 17 Idaho counties on the State Tax Commission’s website, at https://tax.idaho.gov/i-1072.cfm?qp=y. The estimator does not include special voter-approved levies or fees that may appear on the tax bill, and the property tax component is subject to possible adjustments as each local district finalizes its budget.
 
Michelle DeLappe and Norm Bruns
Garvey Schubert Barer
American Property Tax Counsel (APTC)

Updated March 2018

If at First You Don’t Succeed . . .

In December, we reported on a brand new Idaho Supreme Court decision holding that the J.R. Simplot Foundation’s new JUMP facility in Downtown Boise was not entitled to a charitable exemption from property taxation while the property was still under construction.  This left the parties with the knotty problem of how to determine the market value of a partially constructed special purpose – very special purpose -- facility.  That issue was held in abeyance at the trial court level while the parties litigated the availability of the exemption. Now that the Supreme Court has ruled on the exemption question, the valuation issue is reactivated with a trial date in January 2019.  Meanwhile, the Idaho Legislature has stepped in to make sure this type of situation does not recur.  Projects under construction for a tax-exempt purpose can apply for a provisional exemption during construction.  This statutory solution has a retroactive effective date of January 1, 2016.  Surprisingly, the bill’s fiscal statement says there will be no effect on either state or local taxes.

Norm Bruns and Michelle DeLappe
Garvey Schubert Barer
American Property Tax Counsel (APTC)

Updated December 2017

Supreme Court Rules against J.R. Simplot Foundation

Two weeks after oral argument on December 6, the Idaho Supreme Court has denied the J.R. Simplot Foundation a property tax exemption for a charitable building during construction. As a completed public park, agricultural museum, and community center owned by a charitable foundation, it is now exempt. But during construction, it was not used exclusively for charitable purposes, according to the court. Tours and meetings at the property during construction did not qualify because they were minimal, provided no public benefit, and did not further the Foundation’s specific charitable purposes. Also, the legislature acted in 1999 to address another court’s refusal to exempt a hospital under construction. But the legislature limited construction-period relief to hospitals. The court felt it could not expand the legislative relief to other charitable buildings. This leaves the parties with the difficult task of estimating the market value of a partially constructed special purpose facility.
 
Michelle DeLappe
Garvey Schubert Barer
American Property Tax Counsel (APTC)

UPDATED SEPTEMBER 2017

Supreme Court recognizes refund rights arising from city’s failed property tax strategy

A recent Idaho Supreme Court decision dealt another blow to a city’s aggressive strategy for supplementing its revenue without the political pain associated with property tax increases.  Beginning in 2005, the city-owned water and sewer system increased its rates for (a) an imputed “return on equity” like a private owner would require and (b) a payment in lieu of the property tax expense that a private owner would incur.  These rate-raising strategies were stopped in 2012 and 2014, respectively, after they were found to be illegal.  The city resisted refund claims, however, and it prevailed at the trial court level.  The Supreme Court reversed and remanded for further proceedings on the ratepayers’ refund claims.  The opinion was written by Justice Daniel Eismann and issued a few days after his August 31st retirement.  Governor Otter named Fifth District Judge G. Richard Bevan of Twin Falls to replace Justice Eismann on the state’s 5-justice Supreme Court.
 
Norm Bruns
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

UPDATED JULY 2017

Round-Up of Recent Legislation and Rules

H.B. 235: Starting July 1, county commissioners may, at their discretion, exempt all or part of changes in the base value attributable directly to plant investments meeting certain criteria. The amendment also enhances project eligibility beyond manufacturing and lowers the threshold for capital investments from $3 million to $500,000.

H.B. 24: Amendments to administrative procedures before the State Tax Commission go into effect on July 1 to give taxpayers the right to independent administrative redeterminations, including hearings and impose limits ex parte communications among Commission staff about hearings.

Rule 406: In May, the State Tax Commission adopted a temporary rule amendment to reflect recent legislation (H.B. 30), which is retroactive to January 1, 2017. The rule now requires adding a flotation cost component of 0.2% to the market discount rate used in valuing the operating property of rate-regulated electric utility companies for property tax purposes.
 
Michelle DeLappe
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

UPDATED DECEMBER 2016

The Election Brings Change to Idaho’s Constitution and Supreme Court

The November election resulted in two changes of note in Idaho. One is a constitutional amendment allowing the legislature to approve or reject administrative rules based on adherence to its own intent, without being subject to a governor veto. U.S. Senator James Risch (R-ID) wrote in an Idaho State Journal article that this amendment “prevents state agencies from implementing overreaching and burdensome rules” and prevents “an activist court” from weakening the legislature’s authority to approve or reject rules. This could eventually impact Idaho’s property tax rules.

The Supreme Court also has a new justice, Robyn Brody, an attorney from private practice (“from trench to bench,” noted one campaign slogan). She beat state Senator Curt McKenzie for the position to be vacated when Chief Justice Jim Jones retires in January. Ms. Brody will be the third woman to serve on that bench and the first in almost a decade.

Miriam R. Woods
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated September 2016

Appeal Preparations: Don’t Cram 26.2 Miles into a Sprint

Idaho property tax controversies are not for the faint-of-heart. Important deadlines are packed into a short timeframe: Value notices are mailed by the first Monday in June; taxpayers only have until the fourth Monday to appeal. County boards hear and decide all local appeals by the second Monday of July. Unprepared taxpayers will face a messy sprint to the finish come June and will find assessors largely unable or unwilling to talk settlement. They will be swamped; by then, they will prefer to play their odds at the county board (which are quite good). The time pressure will continue at the State Board—hearings will occur by early December because appeals must be decided by May 2018. So if you anticipate the need to challenge a 2017 assessment, treat it like a marathon and start now. Gather data and appraisal analysis in the coming months; engage your Assessor’s Office in discussions starting in early 2017.

Miriam R. Woods
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated June 2016

Administrative Rule Changes Now in Effect

In late March the Idaho Legislature finalized the property tax administrative rule changes that the State Tax Commission had adopted last year. These changes concern documents incorporated by reference (Rule 006); a Boise School District ratio study (Rule 315); personal property tax exemptions for locally and centrally assessed personal property (Rule 626); a clarification on ownership of exempt personal property (Rule 627); budget certification for new construction and annexation (Rule 802); the dollar certification form for budget certifications (Rule 803); and tax levy certification for urban renewal districts (Rule 804). The text of the final rules is at http://adminrules.idaho.gov/rules/current/35/0103.pdf. Taxpayers can learn more about these updates and about Idaho’s administrative rulemaking process from Property Tax Policy Bureau Chief Alan Dornfest, who will speak at Institute for Professionals in Taxation’s upcoming Northwest Regional Property Tax Seminar in Hillsboro, Oregon, on August 4. Register at https://www.ipt.org/core/events/eventdetails.aspx?iKey=NW2016

Miriam R. Woods
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated March 2016

Picking Legislative Snippets - Nothing Drastic

The Idaho Legislature is in session through late March. Happily, no large-scale changes for commercial property owners are on tap. HB 431, signed by the governor on March 17, removes the index on the homestead exemption. Over time this will shift some of the property tax burden to homes and away from commercial properties. HB 534, which passed unanimously and went to the governor’s desk on March 21, pulls solar energy electricity producers out of the property tax system. These producers will instead be charged a gross earnings tax like wind and geothermal energy producers, but at a higher rate and with a somewhat different effect on the caps applicable to local taxing districts’ property tax collections. HB 572 has less clear prospects. It would tighten up the rules for TIF (tax increment financing) for urban renewal projects. On the rulemaking front there is talk about standardizing the discretionary exemption requirements in Idaho Code § 63-602NN for new plant and building facilities, but that will not occur in this session. 

Miriam R. Woods
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated September 2015

Picking The Wrong BTA Representative May Prove Fatal to Your Case

Taxpayers should bear in mind that the Idaho Board of Tax Appeals (“BTA”) strictly limits who can practice in that forum. A Bonner County case was recently dismissed for lack of proper representation, and the District Court affirmed. Compliance requires care at the front end, since appeals are filed locally and then forwarded to the BTA’s office, and it can take time for appeals to reach the BTA. If the wrong person (such as the company’s tax manager) signs the petition and the deadline to fix errors passes before the appeal reaches the BTA, the taxpayer is out of luck. The BTA itself has asked the legislature to adopt a more liberal approach, but its efforts were unsuccessful and the strict rules remain. For a corporate taxpayer, representation is limited to an Idaho-licensed attorney, a non-Idaho attorney in association with local counsel, or a duly authorized director or officer of the corporation. Similar restrictions apply to LLCs, partnerships and joint ventures.

Miriam Woods
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated December 2015

Beat Idaho’s Fast-Track Appeal Season

If you anticipate that you will challenge an Idaho property tax value next year, consider starting now. Idaho’s appeal process moves rapidly. Value notices are mailed the first Monday in June, and the appeal deadline is the fourth Monday. All local appeals must be heard and decided by county boards of equalization by the second Monday of July. Given this aggressive timeline, waiting until early June to dispute a valuation may be a fool’s errand. This is particularly true for properties posing complex or unique valuation issues. Assessors will be scrambling; rather than entertaining settlement talks, they will likely want to wait and see what happens at the board, where chances of taxpayer success are slim. Avoid the rush by gathering your data and appraisal analysis now. Aim to share this information and analysis with your assessing officials by early 2016 so they can review it thoughtfully.

Miriam Woods
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated June 2015

 In Select Idaho Counties, 2015 Property Taxes Need Not be a Surprise

The State Tax Commission website now features a calculator that estimates 2015 property taxes. The feature works in the twenty counties that voluntarily provide the Commission with their information. A source at the Commission said the feature has been around for about 4 years and that counties’ participation has always hovered near fifty percent.

For those in the featured counties, the calculator should work for all property types—commercial, residential, and personal. And it appears to be more sophisticated than simply carrying forward last year’s tax rate: In a test run for a property in Ada County, it somehow predicted a six-percent decline in this year’s rate. But expect to pay more than what the calculator spits out, as it does not account for fees and may not capture all voter-approved taxing district levies.

Miriam Woods
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated March 2015

Idaho High Court Casts Doubt on City's Sewer Connection Fee

In June 2007, the city of Hayden raised its “sewer capitalization fee” nearly threefold. This one-time payment is required upon issuance of a building permit. The increase was tied to the anticipated cost of future capital improvements to Hayden’s sewer system. By statute, a taxing district may only impose fees reasonably related to the actual cost of services provided—here, the value of the sewage system utilized by a new user. The North Idaho Building Contractors Association filed suit to have this fee declared a disguised and unlawful tax. The District Court held it is a lawful fee and dismissed the suit. On appeal, the State Supreme Court reversed and remanded to the trial court for further proceedings. But the five-member court seems to have a split view on what should happen on remand. The three-justice majority opinion casts doubt on whether the fee could ever be reconciled with the controlling statutes. The two-justice concurring opinion gives the City more hope. It will be interesting to see what direction the trial court takes on remand. North Idaho Building Contractors Association v. City of Hayden, Idaho Supreme Court No. 41316 (2014).

Miriam Woods
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated December 2014

Appeal Season Preparations, and Other News

Idaho’s fast-track appeal process poses timing difficulties for many taxpayers: Value notices are mailed by the first Monday in June, appeal petitions are due by the fourth Monday, and then all local appeals must be heard at county boards of equalization and decided by the second Monday of July. That is not much time for a county board to give your appeal the attention it may require. If you anticipate the need to appeal a 2015 assessment, consider preparing the appeal now. If the amount of tax at stake warrants an appraisal, engage a trusted appraiser. Aim to share your analysis and appraisal with your assessing officials in early 2015. This may put you in a better position come June. 

On a separate note, previous updates here addressed Gov. Otter’s formation of a task force to report on areas for the Tax Commission to improve. The report is now available at http://gov.idaho.gov/pdf/Tax_Com_Findings.pdf

Miriam Woods
Garvey Schubert Barer
American Property Tax Counsel)

 

Updated September 2014

Governor To Review Task Force Recommendations For Idaho State Tax Commission

Last January, Governor C.L. “Butch” Otter’s office published a news release announcing the formation of a task force to study ways to improve operations at the Idaho Tax Commission. The task force was created because the Governor’s Office sees potential for the Idaho Tax Commission to improve service to taxpayers and businesses through new or different organizational models. While the Governor initially asked the task force to complete its review in six to eight months (by the end of August), an Executive Order signed in May gives the task force until October 22, 2014 to publish a report of its final recommendations. October 22 is just around the corner. The report will include recommendations for improving service, communication, management, and execution of the Tax Commission’s functions.

Miriam Woods
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated June 2014

Idaho's Evolving Definition of "Fixture"

The definition of "fixtures" is continuing to evolve under Idaho law. This is important because up to $100,000 of the value of personal property is exempt from property tax. In contrast, the value of a fixture is included in the taxable value of the real property to which it is affixed.

The legislature recently amended the definition of "fixture" by removing a clause the Tax Commission feared could be used to treat all fixtures as exempt personal property. The clause excluded from the definition of fixtures "machinery, equipment, and other articles affixed to real property to enable the proper utilization of such articles." Now some machinery and equipment formerly considered personal property may be considered fixtures. At the end of May, the Tax Commission approved deleting part of its corresponding rule, which had provided that items that satisfy all three factors of the common three-factor test are fixtures.

Michelle DeLappe
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated March 2014

Governor Launches Study of Idaho State Tax Commission

On January 15, Governor Otter launched a study of ways to improve the Idaho State Tax Commission. The eight-member study group is led by Dennis Lake, former chairman of the Idaho House Revenue and Taxation Committee. The other members are Dolores Crow, also a former House Revenue and Taxation chairman; Tax Commission Chairman Rich Jackson; Tax Commissioner David Langhorst; Alex LaBeau, president of the Idaho Association of Commerce and Industry; Ben Davenport, president of the Associated Taxpayers of Idaho; Dan John, retired tax policy supervisor for the Tax Commission; and Tom Wilford, former CEO of the J.A. and Kathryn Albertson Foundation. The Governor accentuated the positive – “even the most successful of organizations don’t rest on their laurels” – but it seems clear that the study is purposeful and far from routine. The Governor’s news release identifies the Commission’s rulemaking process and possible restructuring as specific issues to be studied. The group’s recommendations are expected in six to eight months.  

Norm Bruns
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated December 2013

Disagreements on What Qualifies for the Personal Property Exemption

In the wake of Idaho's new limited exemption for personal property, the state Tax Commission and stakeholders have been debating which property will qualify as personal property. Over strong industry opposition, the Tax Commission issued last month a new Rule 205 that characterizes cell towers, underground tanks, poles, pipelines, and railroad tracks as real property ineligible for the exemption. The classification in Rule 205 appears inconsistent with the statutory definition of "fixtures" and the common-law classification on which that is based. For at least some of the property listed as ineligible in Rule 205, litigation could likely reach a different result, as occurred when Nebraska courts rejected in 1991 the Nebraska Legislature's attempt to define pipelines as real property. Alternatively, both houses of the Idaho Legislature could simply reject the new rules, though that seems unlikely to occur.

Michelle DeLappe
Garvey Schubert Barer
American Property Tax Counsel (APTC)

 

Updated September 2013

Recent Developments Involving Property Taxation in Tribal Areas

Three recent developments address the application of Idaho's property tax in areas belonging to an Indian tribe. First, the Idaho Legislature passed a bill exempting property belonging to a federally recognized tribe and situated within the boundaries of the tribe's reservation. It appears some assessors questioned this under prior law. Second, the Ninth Circuit Court of Appeals concluded that federal law prohibits the taxation of permanent improvements built on leased tribal trust lands. The case involved an off-reservation resort developed by a limited liability company in which the Confederated Tribes of the Chehalis Reservation owned a 51% interest. The court ruled that the improvements were exempt from the county's property taxes. Third, and most broadly of all, new federal regulations clarify that state and local governments generally cannot tax (a) permanent improvements on lands held by the United Stated in trust for an Indian tribe, (b) activities conducted under a lease on such lands, or (c) the possessory interest.

 

Updated June 2013

Personal Property Exemption Bill Enacted

The 2013 Idaho Legislature overwhelmingly approved a limited exemption for personal property rather than the total repeal of the tax that had been advocated by Idaho businesses. House Bill 315 (Session Law Chapter 243) exempts the first $100,000 of personal property value and also exempts future personal property acquisitions costing $3,000 or less. The bill applies to both locally assessed property and centrally assessed companies. Businesses with personal property in more than one county can exempt up to $100,000 in each county. Businesses having multiple locations in any one county may file an exemption location election form in order to use the exemption to best advantage. The State Tax Commission issued immediate guidance in the form of an April 17 news release and followed up with extensive temporary revisions to Rule 626. Complete repeal may be considered again by the 2014 Legislature, but the high price tag will remain a deterrent.

 

Updated March 2013

Personal Property Tax Relief, But No Repeal?

As reported here previously, Idaho has given serious consideration to elimination of its personal property tax. Gov. Otter made repeal a top priority in his State of the State speech in January. However, it appears that the latest repeal effort may fall victim to the large price tag and a politically savvy opposition strategy. The Idaho Association of Counties advanced a different form of personal property tax reform in House Bill 315. HB 315 would exempt the first $100,000 of personal property value and would also exempt future personal property acquisitions costing $3,000 or less. The counties' bill would effectively eliminate the personal property tax for most businesses while leaving the tax essentially unchanged for large businesses. In other words, the bill would satisfy much of the political demand for repeal while greatly reducing the price tag. HB 315 has passed the House, but the legislative session is winding down so the final outcome is still in doubt.

 

Updated December 2012

 No More Personal Property Tax in Idaho?

The Idaho Legislature has in recent years given serious consideration to elimination of the personal property tax. Prior efforts stalled out due to the large price tag -- $100 million of lost revenue statewide – combined with claims of a tax shift from businesses to homeowners. The claim of a tax shift is unclear because the proposed legislation provided state funds to cover the loss of local tax revenues. The next session of the Idaho Legislature convenes on January 7, 2013, and elimination of the personal property tax will be up for discussion once again. In preparation for that discussion, the Idaho State Tax Commission has just published a study entitled "2012 Personal Property Tax Analysis." The purpose of the study is to quantify the amount of tax each taxing district and urban renewal agency currently derives from personal property. The study can be viewed at http://tax.idaho.gov/index.cfm.

 

Updated September 2012

 Value Notices by Email?

The Ada County Assessor's office recently considered whether it can or should deliver value notices by email. For now the conclusion appears to be that the governing statute requires snail mail. Electronic delivery is an emerging trend. The Illinois Legislature recently passed a bill giving taxpayers the option to receive their tax bill by email. A new law in New York allows taxpayers to request an electronic receipt for taxes paid from an escrow account. In Seattle, the King County Board of Equalization has adopted a pilot program for electronic filing of appeal petitions. These innovations have benefits for both sides, but taxpayers should make sure their internal processes are adapted to electronic delivery of important tax documents. In the Ada County example, it would be important to ensure that value notices delivered by email do not slip through the cracks and cost the taxpayer its appeal rights.

 

Updated June 2012

Tax Relief for Stalled Real Estate Projects

This year's Idaho Legislature enacted property tax relief for residential and commercial land developers whose projects stalled out after infrastructure, such as roads and utilities, were constructed. The new law provides that "site improvements" -- qualifying infrastructure improvements – will be treated as exempt business inventory until such time as buildings are constructed or there is a change of ownership. The exemption was made retroactive to January 1, 2012, but the legislation also requires an application to get the benefit of the exemption. The State Tax Commission established a May 1 deadline for 2012 applications. Given the limited amount of time between passage of the bill and expiration of the May 1 deadline, it is entirely possible that some eligible taxpayers will not receive the benefit of the exemption this year. If the same conditions persist for another year, application should be made in early 2013 in order to receive the benefit next year. Note that the application deadline in 2013 and thereafter will be April 15.

 

Updated December 2011

City "Fee" Struck Down As Illegal Tax in Disguise

The Idaho Supreme Court recently struck down a "stormwater utility fee" imposed by the City of Lewiston. The challenge was brought by the school district, the local state college, the county, the port district and the irrigation district. Because these governmental entities own property in the city, they were charged the fee along with private property owners. The city began charging the fee on October 1, 2008, to fund the operation and maintenance costs of its stormwater system. The city defined costs broadly to include a variety of interdepartmental charges from the street maintenance department and other divisions at city hall. The Supreme Court found that the fee was an unauthorized tax in disguise. The reasoning of the decision applies to all property owners, not just the other governmental entities who brought the challenge. On December 5, 2011, the city council voted unanimously to refund the nearly $1.2 million collected under the invalid system.

 

Updated September 2011

Reflections on Idaho's 2011 Appeal Season

If you may wish to challenge an Idaho property tax value next year, now is the time to get started. Because Idaho's annual appeal process runs on an extremely fast track, waiting for the value notice is probably not a good strategy. Value notices are mailed by the first Monday in June, appeal petitions are due by the fourth Monday, and then all local appeals must be heard and decided by the second Monday of July. With luck, perseverance and relentless follow up it may be possible to work with your assessor's office during June and early July, but more typically the assessing officials are overloaded with appeals and will make you "take it to the board" where chances of success are low. A better strategy is to start assembling your facts and appraisal analysis now, then share the information and analysis with your assessing officials early next year.

 

Updated June 2011

Confidentiality of Taxpayer Information

Recent Idaho legislation provides welcome clarification regarding the confidentiality of information provided by taxpayers in connection with their property tax assessments. Idaho requires government agencies to make their records available for public inspection. Various types of records are exempt from the disclosure requirement. In the past, the statutory exemption for property tax records was limited to income and expense information in the possession of a county assessor. Effective April 8, 2011, that exemption was expanded in two ways. The exemption now applies to more types of information: personal property returns, operating statements filed by centrally assessed companies, and "confidential commercial or financial information including trade secrets." As to the latter, taxpayers are responsible for designating documents that are considered confidential and exempt from public disclosure. The exemption was also expanded to apply to more government agencies. The legislation also requires a protective order for confidential information produced in tax appeals and litigation.

 

Updated March 2011

Apparently They Didn’t Get the Memo

Normally, a farmhouse assessment would not merit your attention, but a recent Idaho Supreme Court case is noteworthy for reasons having nothing to do with the subject property.  For decades Idaho taxpayers shouldered a heavy burden of proof: “clear and convincing evidence” that the assessor’s valuation was “manifestly excessive, fraudulent or oppressive, or arbitrary, capricious and erroneous resulting in discrimination against the taxpayer.”  The 2003 Legislature lowered the burden in two ways – (1) taxpayers can now get relief if their valuation is simply “erroneous” and (2) the error may be proven by a mere “preponderance of the evidence.”  In February of this year, however, the Idaho Supreme Court ignored this change in the law.  The case considered whether a farmhouse was assessed above market value, and in ruling against the taxpayers the Court fell back on the old burden of proof.  This unfortunate development creates yet another hurdle for Idaho taxpayers.

 

Updated December 2010

Is Idaho Becoming Illinois?

"What's up in Idaho?" That very good question was posed by Contributing Editor David Brunori in the September 20 issue of State Tax Notes. A string of controversies started when a whistleblower at the State Tax Commission alleged inappropriate settlements with large, influential taxpayers. After two investigations concluded there were no improprieties, a skeptical legislator, represented by a former justice of the Idaho Supreme Court, filed a lawsuit asking the court to end the alleged improprieties. In a separate development, another legislator clung tenaciously to his seat on the House Revenue and Taxation Committee even after it came to light that he had refused to pay state and federal income taxes for several years – claiming the taxes are unconstitutional -- and that he was still battling over the amount owed to the taxing authorities. Mr. Brunori summed things up with characteristic wit: "Idaho is not Illinois but apparently it really wants to be."

 

Updated September 2010

Consider an Earlier Start on 2011 Idaho Assessments

Idaho's property tax appeal system presents big problems for many commercial taxpayers. A common problem is the extremely short time between issuance of new values and the first level appeal hearing. Frequently there is not sufficient time to review the value and work with the assessor's office. If you questioned your 2010 value, but had no success in reducing it, perhaps the best approach is to get an earlier start next year. If an appraisal is warranted by the amount of tax at stake, seek out an appraiser who will be credible with your assessor's office and get him or her started as early as possible. If you have issues or information that you want to present without an appraisal, do that as early as possible. This may not work, either, but if you are a past victim of the fast-paced Idaho appeal system it may be worth a try.

 

Updated June 2010

Unauthorized Practice of Law

With Idaho's fast-paced tax appeal season now underway, property owners should be aware of the limitations on who may represent them at the State Board of Tax Appeals. (It is unclear whether similar limitations apply at the county boards of equalization.) The ground rules changed significantly after the Board received guidance from the Idaho Attorney General in July 2002. Prior to that time the BTA freely allowed agents and employees to represent taxpayers. That is no longer true. Under the present version of BTA Rule 30, corporate taxpayers may be represented by an attorney admitted to practice in Idaho or they may represent themselves through duly authorized directors or officers. Partnerships, joint ventures and trusts are similarly limited to representing themselves through duly authorized partners, joint venturers or trustees. Assessors, in contrast, may represent themselves or they may choose to be represented by a "designated representative" (or an Idaho-licensed attorney).

 

Updated March 2010

Idaho Woos Tax Weary Neighbors

Idaho Governor Butch Otter has just published a self-styled "love letter" to Oregon and Washington businesses inviting them to consider the tax advantages of relocating to the Gem State. Governor Otter reports that he and his Department of Commerce started receiving calls after the November election in which Oregon voters approved higher income taxes on both businesses and wealthy individuals. Washington legislators, Governor Otter points out, are considering even larger tax increases to deal with a deficit that exceeds the amount of the entire state budget in Idaho. Governor Otter touts a superior business climate, including "Project 60" that aims to grow Idaho's gross domestic product from $51 billion to $60 billion. While Oregon Governor Ted Kulongoski appears to be holding his fire for now, Washington Governor Christine Gregoire struck back swiftly with statistics and rankings intended to show that the Evergreen State is the better place to do business.

 

Updated December 2009

Assessed Values Down, But Tax Rates Up

County treasurers in Idaho mailed their property tax bills in mid-November, and taxpayers are now facing a December 21 due date for the first half payment. Taxpayers who scrutinize their bills closely will see that some taxing districts increased their levy rates quite significantly. Ada County, for example, increased its levy rate by 14.5 percent. The City of Boise raised its rate by 14 percent. For many taxpayers, the rate increases will be offset in whole or in part by decreases in their assessed values. However, owners of commercial properties should be aware that the macro effect is an unfavorable tax shift -- from homeowners to businesses – because in the aggregate residential values decreased more than commercial values. In Ada County, residential value declined by 12 percent while commercial values went down by only 6 percent. Next year may be a time to look more closely at your Idaho values.

 

Updated September 2009

Where Are All the Appeals?

The Idaho Board of Tax Appeals typically receives about 900 new property tax appeals annually, but the number is only slightly higher this year. Did the Great Recession bypass the Gem State? Were Idaho assessors so in tune with the market that they had no more than the usual number of dissatisfied taxpayers? Were local appeal boards – composed of the county commissioners whose budgets depend on property taxes -- willing and able to right most wrongs in the incredibly short timeframe allowed by statute? More likely explanations start with the fact that Idaho tax rates have fallen in recent years, thus reducing the potential benefit of a valuation appeal. Anecdotal evidence suggests that some assessing officials and local appeal boards use procedural roadblocks to make appeals more difficult. And there are strict limits on who can represent taxpayers at the State Board of Tax Appeals. It's a tough appeal environment requiring careful planning and execution.

 

Updated June 2009

Valuation of Low-Income Housing Projects

In response to the growing controversy over the valuation of low-income housing, Idaho recently enacted legislation providing guidance to county assessors for the valuation of low income housing projects governed by section 42 of the Internal Revenue Code. The new law also outlines procedures that assessors must follow when considering the federal tax credits associated with these projects. The new statute requires assessors to use variations of the three standard appraisal methods. When using the sales comparison approach, assessors must look to sales of similar rent restricted properties. When using the cost approach, assessors must essentially reduce the value of the property based on the rent restrictions. And finally, assessors will include a small portion of the credit when utilizing the income approach through a statutorily prescribed formula based on when the taxpayer enters into the regulatory low income housing agreement with the appropriate authorities.

 

Updated March 2009

Idaho Tax Appeal Season on the Horizon

Idaho's property tax appeal season will be upon us soon. This is a year to look closely at your tax values. In order to get ready for the very fast moving appeal process in Idaho, start by considering whether last year's value makes sense for January 1, 2009. If not, you can initiate informal discussions with your assessor now. Be on the lookout for the formal assessment notices which are mailed on or before the first Monday in June. Appeals to the county board of equalization, a step that must be taken in order to have any further appeal options, are due by the fourth Monday in June. The boards of equalization must complete their work by the second Monday of July, so your appeal may not receive much attention there. Taxpayers may appeal on to the state board of tax appeals or, alternatively, they may go directly to court.

 

Updated Decemeber 2008

Low Income Housing Bill Looms for Upcoming Legislative Session

The next regular session of the Idaho Legislature convenes on January 12, 2009. It appears the Legislature will be asked to involve itself in the property tax valuation of low income housing. Some states have special statutes for this property type, but at the moment Idaho is in the majority of states that simply rely on the general concept of market value. Unfortunately, the application of that concept has been far from simple. The Idaho courts, rather than providing clarity, have muddied the waters. In 1997, the Idaho Supreme Court said that the restrictions on low income housing must be taken into consideration for property tax valuation purposes. Then, in 2006, the Court said that the federal income tax credits for low income housing should be included in valuing the real estate. Taxpayers and assessing officials are hoping for clarification from the Legislature, but discussions to date reflect significant differences of opinion.

 

Updated September 2008

State Tax Commission Under the Microscope

The Idaho State Tax Commission went under the microscope on May 28th when one of its own auditors filed a 17-page whistleblower report claiming that the Commissioners routinely allow out-of-state corporations to pay a fraction of the income taxes they really owe. The auditor also complained that settlements are kept secret under a "loophole" in the state's public records law. Copies of the whistleblower report were delivered to the Governor, the Attorney General, and every member of the Legislature. The Governor appointed a retired CPA from Deloitte & Touche to investigate the matter. His report was delivered on August 18th and, while it exonerated the Tax Commission, it also made suggestions for improvements. The Governor directed the Commission to implement the suggestions by September 30th and, beginning in January 2009, make an annual report to the Legislature that details all settlements to the extent allowed by state and federal law.

 

Updated June 2008

2008 Legislative Wrap Up

The 2008 Idaho Legislature resisted pressure for any major changes to the state's property tax system. Rather than to eliminate the personal property tax, as had been urged by some, the 2008 Legislature chose to eliminate the tax on the first $100,000 of business equipment value – with restrictions. This exemption takes effect only if and when General Fund revenues exceed the prior year's revenues by five percent. Another bill gives county commissioners the authority to offer property tax exemptions for a maximum of five years to a taxpayer who spends a minimum of $3 million for new manufacturing facilities in rural areas. And the big winner was the French company Areva Inc. It received an enormous property tax exemption in the multi-state competition for a $2 billion uranium enrichment plant to be built near Idaho Falls. The portion of the investment that exceeds $400 million is exempt from property taxation.

 

Updated March 2008

Idaho Tax Appeal Season Coming Right Up

Property tax developments in Idaho have been mostly positive over the past few years. First the burden of proof was reduced for taxpayers who appeal, and then tax rates went down. Now that the real estate bubble has burst, this is a year to look closely at your tax values. Start by looking at last year's value to see if it makes sense for January 1, 2008. If not, you can initiate informal discussions with your assessor now. Be on the lookout for the formal assessment notices which are mailed on or before the first Monday in June. Appeals to the county board of equalization are due by the fourth Monday in June. The boards of equalization must complete their work by the second Monday of July. Taxpayers who are still not satisfied may appeal to the state board of tax appeals or, alternatively, they may go directly to district court.

 

Updated December 2007

Property Tax Issues Loom for Upcoming Legislative Session

The next regular session of the Idaho Legislature convenes on January 7, 2008. In light of rapidly rising home values in several parts of the state, it appears that property taxes will be one of the hot topics. Assessors have complained that they are unable to keep up with the rising values because Idaho is a "non-disclosure" state. That is, Idaho law does not require disclosure of the price when a property is sold. A disclosure bill died in last year's legislative session, which has prompted counties to explore their ability to enact disclosure requirements locally. Some legislators, feeling that it is important to maintain a statewide rule, appear ready to support a package deal in which a statewide disclosure requirement is combined with a California-style cap on future increases in homeowners' assessed values. It remains to be seen how this plays out, but business taxpayers should be on the alert.

 

Updated September 2007

Sauce for the Goose Is Sauce for Gander?

The Idaho Supreme Court recently dismissed a property tax case for failure to exhaust administrative remedies. The case involved statistical updating in McCall, an area of rapidly rising values, in 2004. Timely appeals were filed with the Valley County Board of Equalization, which denied relief. Idaho allows 30 days to appeal a BOE order to the Board of Tax Appeals or to court. The McCall taxpayers did neither -- they filed an independent lawsuit 31 days after the BOE orders. The trial court accepted the case, and ruled on the merits, but the Supreme Court reversed and dismissed the case. This year a newly filed case presents an interesting contrast. The Kootenai County Assessor failed to mail his 2007 assessment notices by the statutory deadline. The lawsuit asks the court to roll back values to the 2006 level as a consequence of missing the deadline. Will deadlines be enforced as vigorously this time?