What You Should Know About The Two Bills To Repeal An Idaho Business Tax

Emilie Ritter Saunders / StateImpact Idaho

Competing proposals that address Idaho’s business personal property tax get a public hearing tomorrow morning. The House Revenue and Taxation Committee will hear the two bills that were introduced last week.

The first bill, which has the backing of the Idaho Association of Counties and other organizations that represent local government, would partially repeal the tax on business machinery and equipment.

The second would get rid of the tax completely. That version comes from the Idaho Association of Commerce and Industry (IACI), a lobbying organization that represents many of the state’s largest businesses.

A big difference between the two bills is their price tags. Idaho’s business personal property tax generates about $140 million annually for local government and services, money that some cities and counties would be hard-pressed to go without. Given that, both proposals would replace the forgone tax revenue using money from the state’s main bank account, the general fund.

The bill introduced by the Idaho Association of Counties is estimated to cost about $19 million, while the measure from the business lobby would cost $120 million. But there’s more than that embedded in the two proposals.

The $19 Million Option: House Bill 272

Introduced on behalf of the Idaho Association of Counties, the Association of Idaho Cities, the Idaho School Board Association and the Idaho Association of School Administrators, this is the bill that would partially repeal Idaho’s tax on business personal property. Here’s what it does:

• It exempts the first $100,000 worth of personal property owned by a business in each of its counties of operation. In other words, a business that operates in three counties could claim the exemption three times.
• It exempts any item of taxable personal property with an acquisition price of $1,500 or less, effective January 2013.
• It affirms that the partial repeal does not apply to operating property. That’s the term for property held by entities like utilities and railroads.

As StateImpact has reported, this partial repeal would eliminate the tax for nearly 90 percent of businesses in the state while allowing local units of government to retain 80 percent of the revenue they now receive from the tax.

The $120 Million Option: House Bill 276

This bill, backed by the Idaho Association of Commerce and Industry, would eliminate Idaho’s tax on business personal property. Here’s how:

• It phases in the exemption between now and 2019, making larger increments of the taxable value of business personal property exempt from taxation each year.
• It establishes that the $120 million in replacement funding will shrink annually as current voter-approved levies expire.
• It applies the exemption to operating property.
• It establishes that gas and water distribution companies and electric companies whose rates are regulated by the Idaho Public Utilities Commission may only claim the exemption on property acquired on or after January 2013.
• It sets conditions by which the Legislature could delay the phased-in exemption.

The public hearing is set for 8:00 a.m. in the Capitol’s Lincoln Auditorium. Committee Chairman Gary Collins (R-Nampa) says lawmakers will not vote on the bills tomorrow.

Follow reporter Molly Messick on Twitter for live updates.