Idaho Tax Bill Heads to Governor After Senate Approval

Idaho lawmakers are moving forward with a bill designed to align state tax code with federal provisions, while maintaining some key differences. House Bill 559 passed the Idaho Senate on Friday with a vote of 28-7 and is now headed to the governor’s desk.

Tax Conformity and Business Deductions

The bill, which conforms to the provisions of the One Big Beautiful Bill of 2025, addresses how Idaho handles business deductions, specifically concerning “bonus depreciation.” Idaho has historically chosen not to follow federal guidelines on this provision, and House Bill 559 continues that approach.

Did You Know? House Bill 559 incorporates a plan similar to one used in Delaware, requiring businesses with existing amortization agreements to complete those agreements before fully realizing the bill’s impact.

Fiscal Impact and Rationale

Rep. Jeff Ehlers, R-Meridian, the bill’s sponsor, stated the intention of making the tax changes retroactive is to “capture the full benefit for individuals.” He believes the projected revenue reduction – $155 million in fiscal year 2026 and $175 million in fiscal year 2027 – represents a “reasonable” fiscal impact.

Expert Insight: By decoupling from federal bonus depreciation rules, Idaho retains control over its tax revenue stream and can tailor its policies to specific state economic priorities. This approach allows the state to balance potential benefits for businesses with broader fiscal considerations.

What Happens Next?

If signed into law by the governor, House Bill 559 will officially enact the tax changes. The governor could choose to veto the bill, sending it back to the legislature for further consideration. Alternatively, the governor could allow the bill to become law without a signature. The implementation of the bill’s provisions could then begin, impacting Idaho businesses and individual taxpayers.

Frequently Asked Questions

What is bonus depreciation?

Bonus depreciation is a provision allowing businesses to take a large deduction on qualifying property during its first year of service.

How does this bill differ from federal tax policy?

The bill differs from federal tax policy in its treatment of bonus depreciation, as Idaho has historically and will continue to decouple from this provision.

What is the projected fiscal impact of this bill?

The bill is projected to result in a $155 million reduction in revenues for fiscal year 2026 and $175 million for fiscal year 2027.

How might these tax changes affect Idaho’s long-term economic development?